During H1 FY2022, the highest contributing sectors were healthcare life science (22%), technology (19%) and financial & insurance (18%). The sector dynamics are relatively balanced across the different sectors.
In terms of its client base, HRnetgroup’s top five clients only contributed 14.3% of the Group’s total revenue while its top 10 clients contributed 21.9% of its total revenue.
The top five clients are also from different sectors and have been with the Group for an average of 19 years.
Aside from the Group’s strong earnings growth potential and its rewards to shareholders via dividends, HRnetgroup also has a strong balance sheet.
As of 30 June 2022, the Group has cash & cash equivalents of S$312.7 million with zero borrowings.
This means that the Group is sheltered from the rising interest rate environment and will not be affected by the higher interest or borrowing costs.
It also has positive operating cashflow of S$33.7 million.
Attractive valuation and strong balance sheet
Given the current market volatility, investors should consider investing in companies that could withstand a bear market.
While the business model of HRnetgroup is not immune to the potential recession risk, the company is trading at an attractive valuation with a price-to-earnings (PE) ratio of around 12 times.
Given its asset-light and cash rich position, as well as a forward dividend yield of more than 5%, I believe investors should accumulate a position in HRnetgroup during a bear market to capture upside potential.
Disclaimer: ProsperUs Investment Coach Billy Toh doesn’t own shares of any companies mentioned.
Billy is passionate about the capital market and believes in investing for the long haul. Prior to this, he was an economist at RHB Investment Bank, covering Thailand and Philippines market. He also worked as a financial journalist at The Edge Malaysia and has experience working with an asset management firm. Aside from the capital market, Billy loves a good conversation over a cup of coffee, is a fitness enthusiast and a tech geek.