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HRnetGroup Limited
Labour shortage a boon
■ Singapore’s 1Q22 unemployment rate (2.2%) has recovered close to preCovid-19 levels, driven by easing measures and greater hiring activity.
■ In China, we understand that HRnet has been able to capture strong hiring demand from sectors such as semiconductors and luxury retail.
■ HRnet has a strong net cash position of c.45% of current market cap. We reiterate Add at an unchanged TP of S$1.15, based on c.17x FY23F P/E.
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Banks
Riding on OPR upcyle
■ On 6 Jul 2022, BNM raised OPR by another 25bp to 2.25%. Our economist expects another 25bp hike before end-22 with a total hike of 75bp in 2022.
■ We estimate that every 25bp hike in OPR would increase banks’ net profit by c. 2.1% (ranging from 1.3% for Public Bank to 7.1% for Bank Islam).
■ We reiterate our Overweight call on banks as we expect banks’ net interest margin to expand in 2H22 and 2023 amidst the OPR upcycle.
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As Singapore is a relatively defensive market, we believe the STI will perform well in 2H22 on the back of our 14% EPS growth forecast for this year. Our year-end 2022 target for the STI is 3,390 (3,500 previously), which implies a 10% upside from current levels. Importantly, the index’s valuations are not stretched at present, trading at 2022F PE and P/B of 12.4x and 1.0x respectively, and paying a yield of 4.5%. |
STRATEGY – MALAYSIA
2H22 Outlook: Positioning For Breaks In The Storm
While Malaysian equities will still be swayed in 2H22 by chunky policy rate hikes and quantitative tightening in the US, the FBMKLCI already trades at our assessed trough valuation. While global inflationary concerns should ebb by 4Q22, the Russia-Ukraine war remains a key risk, and we await clearer signs of market capitulation to turn more aggressive. Our strategy is to remain defensive but the depressed market warrants taking some trading bets and longer-term positioning into growth stocks.
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