JT 8.2016This article by Jennifer Tan (left, Director, Research & Products,  Equities & Fixed Income, at the Singapore Exchange) was published in SGX's kopi-C: the Company brew series on 22 January 2016. The article is republished with permission.

SearchAsiaSearchAsia is one of HRnetGroup's 10 distinct human resources recruiting brands. (Above: The company's online job search portal)


With her easy demeanour and ability to build rapport with just about anyone, Adeline Sim is the consummate people person.

"I've been told that I'm all about people, people, people, and it's true," the Executive Director of HRnetGroup Ltd, which makes its trading debut today on SGX, said with a laugh.

Sim enjoys spending time with different people - whether it be her pastry chef bestie of more than two decades, her ex-colleagues in legal circles, the "Yummy Mummy" pals she began her parenting journey with, or the 424 people who co-own HRnetGroup with her.

Exerting a positive influence on those who cross your path is important, noted the 36-year-old, who is also big on books and food.

"My dad always says that anyone he meets should benefit from that encounter, and that has become a driving philosophy for us at HRnet," Sim added, referring to Group Chairman and human resources veteran Peter Sim, who founded HRnetGroup in 1992.

With 10,500 contracted staff at any one time, and more than 8,500 permanent placements across the region per year, the largest Asia-based recruitment agency in Asia Pacific ex-Japan wields considerable clout. "That amounts to one placement every hour. So the number of lives we can positively impact is tremendous," she said.

Adeline Sim
LQM993300At HRnet, we're adding value to people and elevating their lives. This puts us on a totally different level from just selling a service or a product.

- Adeline Sim
Executive Director


(Photo: SGX)

"At HRnet, we're adding value to people and elevating their lives. This puts us on a totally different level from just selling a service or a product," she pointed out.

"How do we do that? By helping organisations find better employees, and by helping candidates discover better careers, based on our specialist knowledge of the market."

Started as a one-stop shop for human resource solutions, HRnetGroup has grown to 24 business units with 838 full-time consultants as at the end of last year, from 17 business units and 426 permanent employees a decade ago.

With over 2,000 clients, its operations span 10 cities - Singapore, Kuala Lumpur, Bangkok, Tokyo, Hong Kong, Taipei, Seoul, Beijing, Guangzhou and Shanghai.

The Group has 10 distinct recruiting brands, including HRnetOne, RecruitExpress, PeopleSearch, SearchAsia and RecruitFirst. It specialises in industries ranging from healthcare, life sciences, finance and legal, to retail, consumer, industrials, telecommunications and technology. It also offers payroll processing, HR consulting and corporate training services.

HRnetGroup is SGX's second Mainboard listing this year. In its initial public offer (IPO), HRnetGroup issued 193.4 million new shares at 90 Singapore cents each. Due to overwhelming investor response, the 85.7 million placement shares in the IPO were 13.17 times subscribed, while the 3.4 million shares in the public tranche were 68.34 times subscribed. More than half, or about 103.9 million shares, went to cornerstone investors, while 440,800 shares were reserved for directors and employees.

Cornerstone investors include Aberdeen Asset Management, Affin Hwang Asset Management, FIL Investment Management (Hong Kong) and Meiji Yasuda Asset Management Co. Strategic investors include TechnoPro, one of Japan's largest technology-focused staffing and service companies, as well as Jasdaq-listed recruiter en-japan inc.

Heliconia Capital, a unit of Singapore state investment firm Temasek Holdings, has been a shareholder since last October and will hold about 1.95% post-IPO.

Both Heliconia and Simco - the Sim family vehicle that controls about 74% of HRnetGroup post-IPO - have agreed to a six-month lock-up period from the listing date.

Proven Track Record

Over the last 10 years, HRnetGroup has grown revenues and earnings by a compounded annual rate (CAGR) of 12.8% and 14.6% respectively. It has been in the black every year since it started operations, except for 1998. As at 31 December 2016, it recorded revenue of S$365 million and net profit of S$48 million. Cash and cash equivalents stood at S$106.1 million as at the end of the period.

According to Frost & Sullivan, HRnetGroup has a market share of 20.6% in Singapore, and is also the city-state's most profitable recruitment player in terms of pretax profits.

Looking back, Sim vividly remembers helping out in the family business during school holidays. Her tasks ranged from photocopying application forms, to filing documents for candidates, and plugging clients' staffing vacancies.


We are a collective of entrepreneurs, and we behave as such.

- Adeline Sim
Executive Director


"I practically grew up in the company, and with its co-owners," she added.

After graduating with a Bachelor of Law degree from the National University of Singapore in 2003, Sim did not join HRnetGroup immediately.

The following year, she began her career as a lawyer with Drew & Napier LLC, where she was engaged in, amongst others, general corporate work and dispute resolution.

It was only after her son's birth, and when her daughter was two months old, that she returned to the fold. In 2009, Sim took on the role of legal counsel with HRnetGroup, and was named General Counsel seven years later. Last month, she was appointed Executive Director, overseeing HRnetGroup's corporate strategic and tactical legal initiatives.

"I guess I've grown into the role, as I was always engaged in one way or another in various issues that the company faced, during my school days and through university," Sim recalled.

"It always felt like I was building something solid here at HRnetGroup."

In particular, Sim believes in cultivating a strong entrepreneurial ethos in the company. "We are a collective of entrepreneurs, and we behave as such."

Diligence, discipline and integrity are some of the Group's core defining values, along with agility, and a focus on the bottomline.

"Although we are a professional services company, we're very much driven by schedules, processes, meetings and practices. Our daily program includes fingerprinting in before 8:30am, a wellness exercise, and our morning sales meeting, where we track sales activities and numbers."


♦ Building a Legacy

Sim attributes the process-driven mindset to the legacy built by her father and uncle - RecruitExpress Group Chief Executive Officer JS Sim. "It's that same focus on efficiency," she added.

HRnetGroup also has a sales-driven culture, with about 85% of employees holding sales roles. "In our organisation, there are no receptionists, no secretaries and no drivers," she said.

To sharpen that edge, particularly for those fresh out of university, employees are given a detailed sales manual and taught the 10-10-3-3 rule to boost success rates of matching candidates with clients, Sim said.

Every week, each employee is encouraged to set up 10 internal interviews with potential candidates, send out 10 profiles to clients, and set up three appointments for clients to meet candidates. This will result in a minimum of three candidates starting work per quarter.

Stock price  89.5c
52-week range 89.5c - 92.5c
Market cap S$903.4m
Price-book 16.7 x
Dividend yield -
Source: SGX StockFacts

"It takes discipline, and it's easy to fool yourself and say you don't need to set activity targets every week in order to be a PHC or productive headcount," she noted.

"But numbers never lie, and we have statistics to prove that the 10-10-3-3 formula, which is practiced by our most successful consultants, can make you very happy and very well-rewarded."

Remuneration packages and promotion criteria are equally transparent. "You don't have to carry your boss's bag to get promoted. For someone new, if you chalk up sales in excess of five times your payroll costs for two straight quarters, that's an automatic promotion."

The company's profit-sharing - rather than commission-based payouts - model also sets the tone. "This directs the energy of every team member to focus on, among other things, gross profits instead of market share, and cost-effectiveness instead of budget spend. This means everyone is motivated to ensure everyone else in their business unit is performing well," she added.

The IPO helps HRnetGroup build on its co-ownership model, and will see up to 404 more employees becoming shareholders, motivating them to continue growing profits. A total of 22 shareholders in specific subsidiaries will also have the option of swopping a portion of those holdings for shares in the company.

Fire in the Belly

For some, the Group's ethos and culture can be daunting, Sim acknowledged.

"Some people think this is a crazy place to work in. Those who stay with us must be self-starters, and have the fire in them to succeed. If you're looking for a 9-to-5 job, this is not for you."

Meanwhile, prospects for the recruitment industry remain rosy. "We're quite bullish because Asia is the growth capital of the world, and as companies grow, they will need talent," Sim noted.

"Flexible staffing is also an easy way for companies to operate, and this trend, which is very common in the US, is gaining traction here."

With its IPO proceeds, HRnetGroup plans to ramp up operations in North Asia, particularly in Tokyo and Shanghai, with a focus on temporary and contract staffing, as well as professional recruitment services.

Frost & Sullivan estimates the market for flexible staffing and professional recruitment services in North Asia is valued at about S$46.3 billion, versus S$3.6 billion for Bangkok and Kuala Lumpur, and S$1.4 billion for Singapore.

We believe North Asia will drive our next stage of growth. The recruitment markets in cities such as Shanghai and Tokyo are also highly fragmented, which provides compelling opportunities for us to deepen our presence.

- Adeline Sim
Executive Director


HRnetGroup's North Asian operations account for nearly 39% of its gross profits. In comparison, Singapore contributes 57% of the Group's gross profits.

"We believe North Asia will drive our next stage of growth," she noted.

"The recruitment markets in cities such as Shanghai and Tokyo are also highly fragmented, which provides compelling opportunities for us to deepen our presence."

HRnetGroup intends to maintain a 50:50 net profit split for its staffing and professional recruitment divisions. "While flexible staffing provides strong recurring cashflows and a stable revenue base, the professional recruitment services division does drive our margins," she added.

In addition to organic growth, HRnetGroup is seeking merger and acquisition opportunities to further entrench itself in existing markets or enter new ones. "This will enable us to improve existing capabilities or acquire new ones to quickly gain scale and profit leadership, particularly in highly competitive cities."


♦ Blue-sky Environment

With relatively low entry barriers, competition is a persistent bugbear, and staying nimble is imperative, Sim noted. "We provide a blue-sky environment, giving our staff freedom to find the best areas of growth and move quickly without being dragged down by bureaucracy - that's how we thrive."

Talent retention is a huge concern. "Over the last two to three years, we've been very focused on training productive headcount, and haven't been concentrating as much on retention, so we're now working on that."

Another focus is how to best harness technology to disrupt the industry and leapfrog rivals. "It's easier to disrupt flexible staffing services with technology, so we've developed an app for that business," she added.

But professional recruitment services require more human intervention, for example, advising clients on the specific talent landscape, negotiating packages, or advising candidates whether moving or staying works best in their circumstances.


Flexible staffing is also an easy way for companies to operate, and this trend, which is very common in the US, is gaining traction here.

- Adeline Sim
Executive Director


At the end of the day, it boils down to who knows the space best, and who is quickest in finding the right candidate.

"The question is how we organise ourselves to ensure we are faster and better, and a 120 hour-work week could be one way to go about it," Sim said, referring to a comment made by notorious workaholic and tech billionaire Elon Musk.

Musk had said that if one worked 120 hours a week, while everyone else worked 40 hours per week, one could accomplish in four months what the rest would take a year to achieve.

But the mother of two - her son is 10, and her daughter, 9 - admits that upholding the mantra of work-life integration is a more realistic goal. "It's not sustainable to say business always comes first - something will have to give."

"My son has already complained that other families go on holidays, while we just go where Mummy has meetings," she added with a laugh.

But the boundaries between work and play are blurred for Sim. "Work has become play. Work is not drudgery - otherwise, why get on the plane? We have offices in 10 cities, and I travel so much, so I try to look forward to something in every city that I visit."

Another comment from her son that gave her pause is: 'Mummy, you have very high standards and very little patience'.

"It's true - high standards have become my way of life," Sim admitted. "But we need high standards because we have to set the benchmark, and ultimately, it's the little things that count."

This attention to detail can be seen from HRnetGroup's rule of establishing a presence only in Grade A office buildings. "What's the experience and impression that you give clients and candidates when they meet you? Is it a positive one?"

Discipline is also critical. "I always tell my kids the amount of effort you put in matters above all else, because the degree of intelligence between you and the next person in class is not huge. Instead, how much discipline you have will be the key differentiator."

The Chinese proverb "yin shui si yuan" (饮水思源) - meaning when one drinks water, one should think of its source - is a maxim that resonates deeply.

"Gratitude and positive thinking are important. It's also about the law of attraction - if you keep having negative thoughts, they will ultimately happen," Sim noted.

"Life isn't perfect, but these are some of the values that will help us get through difficult patches, which are bound to happen, no matter who you are or where you work."

Financial results

Year ended 31 Dec 
FY2016 FY2015 FY2014
Revenue 365,043 356,014 324,452
Profit before income tax 59,287 52,113 45,915
Profit attributable to owners of company 41,085 38,183 33,351

Source: IPO prospectus

Outlook & Risks
    • Investors face immediate and substantial dilution in NAV per share and may experience future dilution as the offer price is higher than the Group's NAV per share as at 31 December 2016 of (a) 10.9 cents; and (b) 26.9 cents (adjusted for various effects including GLOW Initial Shares, Loyalty Shares, and Cornerstone Shares)
    • HRnetGroup could be affected by fluctuations in economic activity and employment growth in the key sectors and geographies it operates in.
    • Competition in the highly fragmented industry may affect its financial performance, as its operations have relatively low barriers of entry and face price-cutting pressure from existing rivals and new entrants
    • HRnetGroup is subject to laws, regulations and policies imposed by various government and regulatory authorities, which may affect the operations and/or scope of its business; eg. it may not be able to maintain and/or obtain approvals and licences from relevant government authorities necessary to carry out or expand its business, or cope with future regulatory requirements.

HRnetGroup Ltd

Founded in 1992, Singapore-headquartered HRnetGroup is the largest Asia-based recruitment agency in the Asia-Pacific ex-Japan region, with a client base of over 2,000, including more than a hundred Fortune 500 companies. It comprises 24 business units with 838 full-time consultants, spanning 10 growth cities in Asia - Singapore, Kuala Lumpur, Bangkok, Hong Kong, Taipei, Guangzhou, Shanghai, Beijing, Tokyo and Seoul.

Its key business segments are flexible staffing and professional recruitment services. The Group has 10 distinct recruiting brands, including HRnetOne, RecruitExpress, PeopleSearch, SearchAsia and RecruitFirst. It specialises in industries ranging from healthcare, life sciences, finance, and legal, to retail, consumer, industrials, telecommunications and technology. It also offers payroll processing, HR consulting and corporate training services.

For the company's IPO prospectus, click here.

The company website is: www.hrnetgroup.com.

The ccompany's Stock Facts page is here.

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