Mahara Human Resources (1831): Saudi’s Largest Workforce Agency

Maharah for Human Resources Company (1831, or MHR for the article) offers recruitment services for public and private sectors in Saudi Arabia and the United Arab Emirates. It operates in two segments, Corporate and Individual.

The Corporate segment provides labor force services to various industries comprising retail, hospitality, healthcare, operation and maintenance, and banking. The Individual part offers worker rental services; and khidma, a program for providing part-time housekeepers and home care nurses on an hourly basis and full-time home care nurses.

MHR connects worker-hungry employers with qualified workforce talent in Saudi Arabia. The company serves over 800 clients and deploys 50,000 workers to temporary and full-time positions. They share a market duopoly with an 18-20% share in corporate and individual work placements.

The golden egg in MHR’s business is their household workforce segment. Household segment revenue grew at a 145% CAGR from 2015-2017 as hourly workers like housekeepers and home nurses increase in popularity. The company will capitalize on this growth by offering new part-time services like child care, party hosting, and handyman services.

Reputation matters in an industry like workforce placement and MHR has earned its place as one of the best in the country. A high reputation allows the company to hold a higher-than-average number of work visas for its employees. Getting these work visas takes time and money.

With quick access to any work visa they want, MHR can deploy more workers into more industries faster than the competition. In turn, it reinforces their brand power as one of the best work placement recruitment services in the kingdom.

Yet, its stock price performance hasn’t reflected its industry-leading qualities. Since its IPO (2019), the stock’s returned -7.2%. You can buy MHR for ~13x current NOPAT with an 8.3% dividend yield at the current price. The dividend is well-protected as FFO covers its total debt 13x over. Today’s market price’s embedded expectations assume zero top-line revenue growth and EBITDA margin compression over the next four years.

There are a few reasons why this opportunity exists:

  1. Saudi Arabia is an underfished market.
  2. MHR is a 2019 failed IPO
  3. The company is < $1B market capitalization.

Let’s dive in.

Structural Advantages of Large Human Resource Companies

Workforce resource companies benefit from economies of scale. The bigger they get, the better their business. Saudi Arabia is a perfect example. The company’s home to 5.8M households, each with differing workforce needs. To service that many families, a company needs a global footprint, particularly one with many local offices tapping into one global workforce supply pool.

It starts with the immediate need of the household client. Hiring a housekeeper or home nurse isn’t a lightly-made decision. It’s like adding another member of the family. As such, household clients don’t hire the first person they see. Nor do they want to recruit from a workforce placement company of a bad/little reputation.

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Disclaimer: All statements are solely opinions and are for educational purposes only.

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