Wednesday, 14 June 2017

HRnetGroup - Balloted

Perhaps not many people have heard of HRnetGroup, but I'm sure most people heard of Recruit Express. Recruit express is one of the companies under HRnetGroup.
Largest Asia-based recruitment agency in Asia Pacific (excluding Japan), as compared to other key players within the professional recruitment and flexible staffing industry with presence in Asia Pacific, according to Frost & Sullivan
Dominance in Singapore
According to  Frost & Sullivan, we are the largest recruitment player in Singapore in terms of number of licensed consultants and revenue as well as the most profitable recruitment player in Singapore in terms of net profit before tax.  
Being the largest bring about Economies of scale. Which when used properly can result in further consolidation of its leading status. Personally, I have preference on companies with large presence in the local segment which HRnetGroup dominates.
Our flexible staffing business (32%) provides us with a relatively stable and steady revenue stream in economic downturn as compared to our professional recruitment business (66%), while the professional recruitment business generally performs well during periods of economic growth
With economic uncertainty, given the macro economic environment, having a stream of stable and steady revenue is important as it forms a baseline of support.

Pool of 2000 clients, including 104 Fortune 500 clients, meant their business is more diversified and spread out over many different segments. Their top 5 customers only contributed 14.1% of their business!

Net profit and revenue looks to be in an upward trajectory over the years since they were formed.
The prospectus showcased many charts with them leading in almost all categories against peers. I'm not going to look so much into those.

Positive net cash from operating activities.
Our rewards system is based on sharing of profits rather than payout of sales commissions. The emphasis on business unit profitability directs the energy of every team member to focus on:
  • gross profits instead of market share and/or revenue
  • cost effectiveness instead of budget spend  
  • business unit profitability as opposed to pure individual sales achievement
No fixed dividend policy but the directors intend to recommend and distribute dividends of 50% of their net profit after tax (excluding exceptional items) for FY2017 and FY2018.

There are clearly some downsides to it with the largest negative being that it is not a value stock with its premium over their net asset value. It is also harder to value a company that is dependent on their staff abilities as there are no tangible assets involved.

However, it has always been my dream to start a company that focus on providing pure services and just for this point, I've balloted for the IPO. My battle plan is to keep the stock for long term if I'm lucky enough to get the IPO. Under the high chance of not being allocated. I'll only purchase from the open market if it is less than $1.00.

All the best!


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