Adding an external wing
Acquires majority stake in fintech start-up
HRnetGroup (HRnet) is acquiring a 51% stake in fintech startup Octomate for SGD676.5K from an unrelated third party. The move will facilitate the integration of Octomate’s Instant Payment solution with HRnet’s Ease Works app that allows contractor employees to be paid instantly after approval of their timesheets. While there is no material impact on our EPS forecasts, we think Octomate is in a sweet spot to extract potential synergies as it enables cross-selling to the group’s new and existing clients. Maintain BUY with TP of SGD1.07, based on 15x FY23E P/E.
Offering instant payment to entice contractors
Octomate’s CEO and Co-Founder Zoey Tong will become the 37th business co-owner of the group. Set up in 2019, Octomate is a cloud-based workforce management solution, designed to help enterprises manage their contractors from onboarding to roster and timesheet management. It is built on blockchain for maximum security and scalability. The breakout star in its suite of offerings is the ability to power instant payments (i.e salary, reimbursements of claims, or even rewards). Octomate is the first of its kind to offer hybrid HR tech and fintech solution on one platform.
An independent brand with strong clientele base
According to management, Octomate will remain an independent brand of HRnet. It intends to develop this young start-up further as a value-added product offering. Currently, Octomate has over 3,000 daily active users with blue chip customers such as Amazon, H&M, and Hyundai Motor Group, etc. There is a one-time implementation / activation fee charged to customers to go live, as well as recurring subscription fees by tier or volume of transactions, depending on clients’ nature of business.
The fight for top global talent is on
HRnet’s professional recruitment business segment looks set to benefit as Singapore goes all out to attract more highly skilled foreigners to strengthen its position as a global talent hub. From 1 Jan 2023, applicants for Singapore’s new work pass will need a monthly salary of at least SGD30k, comparable to the top 5% of Employment Pass holders. Higher remuneration packages should help HRnet offset slower placement volume growth amid the current uncertain economic outlook.