*Hartalega

Date announced 11-Sep-10
Quarter 30/09/2010 Qtr 2
FYE 31/03/2011

STOCK Hartalega C0DE 5168
Price $ 5.49 Curr. PE (ttm-Eps) 11.59 Curr. DY 2.43%
LFY Div 13.33 DPO ratio 34%
ROE 40.8% PBT Margin 33.1% PAT Margin 25.6%

Rec. qRev 184312 q-q % chg 8% y-y% chq 37%
Rec qPbt 61018 q-q % chg 13% y-y% chq 48%
Rec. qEps 12.96 q-q % chg 14% y-y% chq 42%
ttm-Eps 47.37 q-q % chg 9% y-y% chq 53%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5% Avg.H PE 12.00 Avg. L PE 10.00
Forecast High Pr 7.25 Forecast Low Pr 4.13 Recent Severe Low Pr 4.13
Current price is at Middle 1/3 of valuation zone.

RISK: Upside 56% Downside 44%
One Year Appreciation Potential 6% Avg. yield 4%
Avg. Total Annual Potential Return (over next 5 years) 10%

CPE/SPE 1.05 P/NTA 4.73 NTA 1.16 SPE 11.00 Rational Pr 5.21



Decision:
Already Owned: Buy Hold Sell Filed; Review (future acq): Filed; Discard: Filed
Guide: Valuation zones Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr


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Commentary on Prospects and Targets

Our Group’s products are sold to the Health Care Industry. Glove consumption is inelastic in the medical environment because the usage of glove is mandatory for disease control. Our nitrile synthetic glove was well accepted by the end users due to its high quality and elastic properties that mimic that of a natural rubber glove. Our protein free and competitive priced nitrile glove has made it more affordable for the acute health care industry to continue switching from the natural rubber to our synthetic nitrile glove to avoid the protein allergy problem.

We have commissioned 2 more new advanced high capacity glove production lines for the current quarter ended 30 September 2010, the balance of the 4 lines from Plant 5 will be fully ready by January 2011. We will continue to take advantage of the Demand Growth for nitrile gloves due to health care reform and the expansion in usage of nitrile gloves in the food industry. Our company is well positioned with the competitive advantage delivered by our high output production lines to compete in what is expected to be a challenging and competitive market as more players will emerge in the synthetic nitrile glove sector. While the weakening of USD continues deliver pressure on product pricing.

Despite that, the Board of Directors is optimistic that the Group will achieve the internal target growth for both sales revenue and net profit for the financial year ending 31 March 2011.