"We see growth driven by an improving Singapore economy, which we expect HRnet to benefit from on more permanent and flexible staffing placements going forward," he adds.
HRnet is trading at just 13x PE, a level deemed by Yeo as undemanding, as it is just slightly above its historical mean while giving an attractive dividend yield of around 6%.
The way Yeo sees it, with a more positive economic outlook, there ought to be a bigger number of job placements that will be handled by HRnet.
The company is expanding its regional presence, including Vietnam most recently.
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In its most recent 1HFY2025 results, revenue was up by just 3.4% y-o-y to $295 million, led by growth in flexible staffing, Taipei and China markets, while Singapore was down, along with the professional recruitment segment.
Along with a bigger volume of lower-margin business, margins dipped to 20.7% from 22%, with core earnings up by 10% y-o-y to $25 million.
In line with Yeo's expectations, an interim dividend of 2 cents was declared.
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Going forward, Yeo has lowered his FY2025 and FY2026 revenue projections by 9% and 2%, based on 1HFY2025’s financial performance and run rate.
Despite his earnings adjustment, growth remains robust at 15% each for FY2026 and FY2027, driven by anticipated recovery in hiring activities, especially in North Asia and new markets such as Vietnam.
"We also factor in higher margins on better cost control and revenue mix. Hence, our FY2025-FY2027 earnings growth CAGR remains firm at 15%," says Yeo.
In line with the market's overall re-rating of small-cap stocks, Yeo has slightly increased his valuation multiple for HRnet from 14x to 15x FY2026 earnings, which is near to +1sd of its historical mean.
HRnetGroup shares traded at 74 cents ahead of the lunch break, down 0.67%.
