I have been keeping track on HRnet since its listing in Jun 2017 (mentioned on my blog here). I like its business model which is asset light, strong operating cash flow and easily expandable, especially with a strong war chest after its IPO (sitting on close to S$280 mil cash reserve). Hence, I have started to accumulate at 80 cents and lately there are some research reports by analysts on the stock (here).
It's expected to record ~S$40 mil net profit for FY17. If the management can utilize the cash reserve to generate the following returns, it will have the following impact on its profit (Based on RHB's research, lets assume it has budgeted S$200 mil for acquisition):-
5% will give additional PBT of $10mil
7.5% will give additional PBT of $15mil
10% will give additional PBT of $20 mil
My investment case is basing on growth potential from M&A and ride the recovery in labour market of Singapore. Target price from analysts ranging from $0.96 to $1.14, which indicates upside potential of 20% to 40%, which I tend to agree after my own estimate basing on discounted cash flow and PE valuation basis.
Please do your own valuation if this stock excites you.
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Q2 FY18 results have been encouraging with growth in both revenue and profitability.
ReplyDeleteContinue to hold as valuation do not seem high at forward PE 18, with continued growth expectation.