HRnetGroup Ltd (SGX: CHZ), or HRN, is a talent acquisition and flexible staffing company with operations in 13 cities, including Singapore, Bangkok, Indonesia, and Hong Kong, to name a few. The group has two complementary operating segments — professional recruitment and flexible staffing — and serves clients in 30 different sectors.
Since its listing in 2017, HRN has conducted a series of acquisitions. These are meant to build up the group’s presence in key markets as well as ensure it captures a slice of the burgeoning human resources market. Have these acquisitions panned out well for the group thus far? Should investors continue to be patient and hold out for results?
Acquisitions in 2018
Below is a brief summary of the acquisitions HRN made in 2018.
- 12 Feb 2018. Acquired a strategic stake in Glints Intern Pte Ltd for a sum of S$500,000. Glints is a career discovery and development platform for graduates and young professionals in Asia.
- 9 June 2018. Acquired 51% of REForce Shanghai. This is a three-year-old executive search business in Shanghai, Beijing, Guangzhou, and Suzhou. The minimum consideration which HRN needs to pay is at least RMB 16 million in three tranches.
- 2 August 2018. Acquired Career Personnel Limited, a flexible staffing business predominantly serving Hong Kong government agencies. Consideration is HKD 800,000 above the net asset value of the business to be determined on 30 September 2018.
In addition to the above, HRN has also incorporated entities in Malaysia for recruitment and flexible staffing as well as a company in Shenzhen for management consulting and business information provision.
The above acquisitions would provide good support for HRN’s expansion. Glints would be useful as a platform reaching out to young adults looking for jobs, while REForce Shanghai would be able to tap into professional recruitment and staffing in four Chinese cities. Career Personnel is a smart move as government agencies hire a lot of staff, and HRN now has a finger in this pie, too.
Building the business in 2019
In January 2019, HRN incorporated RecruitFirst Services (Shanghai) Limited with a paid-up capital of RMB 10 million, with the core business of human resource outsourcing and talent intermediary. Two months later, in March, RecruitFirst Taiwan was incorporated with an initial share capital of S$700,000 to operate the business of flexible staffing and human resource outsourcing.
These two corporate announcements show that HRN is further extending its reach into both China and Taiwan, and it’s working on offering a good suite of services to clients. In May 2019, HRN also declared that it owns a 7.85% stake in Bamboo Health Care Holdings Ltd (HKG: 2293). Just yesterday, HRN announced that it had raised its stake in Bamboo Health Care to 8%.
The big picture
The acquisitions above show HRN’s commitment to building and growing its business since the IPO, and there are still good opportunities for the group to make further acquisitions of smaller competitors. Investors, though, may need to continue to be patient as some of these acquisitions need time to integrate and grow, while others are newly-incorporated companies that need resources and time to scale up and begin contributing.
The good news is that while HRN is building up its capabilities and competencies, the group is also generating very healthy free cash flow. This cash flow supports its acquisition strategy such that it need not take up a significant chunk of borrowings (the group was debt free as of 31 March 2019). Over time, these acquisitions may slowly bear fruit for investors.
The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended the shares of HRnetGroup Ltd. Motley Fool Singapore contributor Royston Yang does not own shares in any of the companies mentioned.