HARTALEGA at a glance

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HARTALEGA at a glance

 

Hartalega

 

The revenues and adj EPS of Hartalega grew consistently for many years.  Due to the pandemic, its revenues and EPSs shot up, due to higher volumes delivered and better profit margins.  Now that the pandemic over, the world is faced with an oversupply of past inventories and falling demands for gloves.   It will be another year or two before these inventories are depleted and demands for gloves at the normal level resumed.   Gloves usage are still expected to grow over the years. 

Due to the huge profit margin during the pandemic enjoyed by the glove manufacturers and the ease of entry into this industry, many new players were attracted and established production of gloves.  Faced with new competitors, especially those from China, the preexisting glove manufacturers may not be as relaxed as in the past.   They can expect their profit margins to be very tight, having to keep production costs down.

Finally, in this commodity market of gloves, it will be the ones with the lowest costs that will be the leaders in this revamped glove industry.

HARTALEGA

 

Glove stocks uniform trading pattern sparks intrigue

Justin Lim
theedgemarkets.com

July 15, 2020


KUALA LUMPUR (July 15): All seven glove stocks on Bursa Malaysia took a nail-biting roller-coaster ride together during the final trading hours yesterday.

The seven counters plummeted simultaneously shortly after 4pm, but rebounded soon after, right before the closing bell. Share price charts show a uniform V-shape pattern among the rubber glove makers (see charts), whose share prices have rocketed at least several folds since March.


What was intriguing was that there was no negative news flow about the rubber glove industry that could possibly have swung the share prices in such a drastic and uniform fashion.

The sudden plunge among the seven glove stocks during the final trading hours was in the range of 15% to 25%. The big drop on Top Glove Corp Bhd and Supermax Corp Bhd dragged the FBM KLCI down by 1.8% to its intraday low of 1,577.33 before it bounced back to above 1,600-level to close at 1,598.75 points, down 7.68 points.

Investment analysts were baffled by the share price trend.

Some experts suspected that algorithmic trading activities could be at play. Algorithmic trading is a method of executing orders using automated pre-programmed trading instructions that account for variables such as time, price, and volume.

Malacca Securities Sdn Bhd head of research Loui Low did not rule out the possibility that algorithmic trading activities could be involved.

Another possibility, he believed, could be that the glove counters had triggered the stop limit for various investors and brokers.

MIDF Research senior analyst Imran Yassin Md Yusof, meanwhile, commented that investors had started to take profits following the strong share price rallies.

Top Glove, Supermax and Hartalega Holdings Bhd shares all settled in the negative territory yesterday, after closing at their record highs on Monday.

Supermax experienced the steepest drop with a 25.2% plunge to a low of RM12.52. It closed at RM15.90.

Similarly, Top Glove sank 15.4% to its intraday low of RM20.50, but bounced back to close at RM23.16. Hartalega sank 15.02% to a low of RM15.28, but later pared most of its losses to finish at RM17; Kossan Rubber Industries Bhd slid 14.2% to RM12, before closing at RM13.50.

Comfort Gloves Bhd's share price also tumbled 19.2% to RM3.33, before settling at RM3.84. Careplus Group Bhd fell 21.7% to RM1.48, then rebounded to close at RM1.76, while Rubberex Corp (M) Bhd dropped nearly 18% to RM3.22, to eventually settle at RM3.65.


https://www.theedgemarkets.com/article/glove-stocks-uniform-trading-pattern-sparks-intrigue

Analysts see rubber glove stocks bouncing off

TheEdge Thu, Mar 05, 2020


KUALA LUMPUR: The Covid-19 epidemic has pushed investors into stocks of rubber glovemakers, which have seen an uptick in demand.

The Healthcare Index climbed 13.77 points or 1.03% to close at 1,344.72 yesterday, with the Big Four rubber glove players dominating the list of most active counters on Bursa Malaysia.

Among the most active stocks was Careplus Group Bhd, which saw 62.9 million shares change hands. The stock closed up 12.73% at 31 sen with a market capitalisation (cap) of RM165 million.

Shares in Adventa Bhd gained 10.77% to settle at 72 sen, bringing a market cap of RM110 million.

Supermax Corp Bhd rose 5.59% to end the day at RM1.70, while Hartalega Holdings Bhd and Kossan Rubber Industries Bhd were up 3.48% and 1.46% to close at RM6.24 and RM4.85 respectively. Top Glove Corp Bhd shares were unchanged at RM5.70.

Analysts said the stage is now set for a solid growth in the rubber gloves sector in 2020 following three quarters of anaemic quarterly earnings growth.

“From a low base due to the lacklustre demand of the past 12 months, the sector will benefit from restocking activities, ramping up demand as the current outbreak of Covid-19 enforces higher hygiene standards,” Kenanga Research analyst Raymond Choo Ping Khoon said in a sector report on Feb 7.

He noted that even before the Covid-19 crisis set in, the third quarter of 2019 (3Q19) results season had indicated a positive recovery in demand and hence, volume growth of industry leaders such as Top Glove and Hartalega. Both players recorded 6% and 14% sequential volume growth, respectively.

“From our ground checks, demand for nitrile gloves is picking up again with players’ new capacities swiftly taken up. We believe this uptick in demand is turning positive and should be reflected in players’ bottom line in subsequent quarters.

“For illustration purposes, going forward, assuming nitrile:latex [ratio] of 80:20 (currently 67:37) and based on estimated global demand of 308 billion pieces in 2020 (forecast for 2019 is 300 billion pieces and assuming an 8% growth rate in 2020), this implies nitrile growth rate of 30% or an additional 51 billion pieces from switching to nitrile gloves,” he added. Kenanga Research has an “overweight” rating on the sector.

Affin Hwang Investment Bank said earnings growth for rubber glovemakers declined slightly in the just-ended 4Q19 as some of the manufacturers were still feeling the negative impact from the labour shortage issue.

“However, most of them have started to deliver stronger quarter-on-quarter earnings growth due to stronger demand from the US, as buying patterns have started to normalise since the tariff hike in China gloves in 3Q19. We believe that as most manufacturers are already operating at high utilisation rates, the recent surge in demand due to Covid-19 would provide them more flexibility in setting selling prices,” it said in a strategy note on Tuesday.

On Jan 24, Malaysian Rubber Glove Manufacturers Association president Denis Low announced that its members are prepared to gear up to produce more gloves to meet the requirements if the Covid-19 outbreak becomes pandemic.

At press time, the number of confirmed cases of Covid-19 totalled 93,500, with at a death toll of at least 3,204 people worldwide.

Confirmed cases have also been ballooning in other parts of the world, including in advanced and developing economies such as South Korea, Italy and Iran. Malaysia reported 14 new cases yesterday, bringing its tally to 50.

According to Bloomberg data, most of the glove counters are still trading below analysts’ consensus target price (see table), except for Hartalega. At yesterday’s closing of RM6.24, the stock is trading above its average target price of RM6.15.

Those currently trading below the analysts’ consensus target prices are Comfort Gloves Bhd (21%), Kossan (15%), Supermax (14%) and Top Glove (5%).


https://www.klsescreener.com/v2/news/view/647178/analysts-see-rubber-glove-stocks-bouncing-off

ADVENTA    0.715
AFFIN           1.770
BURSA         5.480
CAREPLS     0.305
COMFORT   0.875
HARTA         6.220
KENANGA   0.440
KOSSAN      4.940
SUPERMX   1.720
TOPGLOV    5.720

Hartalega 4Q net profit up 30%

Justin Lim/theedgemarkets.com
May 15, 2018 18:54 pm +08

KUALA LUMPUR (May 14): Hartalega Holdings Bhd’s saw its net profit jump 30.7% to RM116.8 million in the fourth quarter ended March 31, 2018 (4QFY18), from RM89.4 million a year earlier.

The world’s largest synthetic glove manufacturer’s quarterly revenue rose by 17% to RM616.84 million, from RM527 million in 4QFY17. Earnings per share was at 3.53 sen in 4QFY18, compared with 2.72 sen the previous year.

For the full year (FY18), Hartalega reported a net profit of RM440.1 million or 13.29 sen per share, up 55.4% from RM283.3 million or 8.62 sen per share in the previous year. Revenue also increased 33.33% to RM2.4 billion, from RM1.82 billion in FY17.

Its group managing director Kuan Mun Leong said in the statement: “This marks another significant milestone for the Group. Our strategic plans continue to bear fruit, enabling us to deliver a strong performance on the back of increased sales volume, in tandem with our continuous expansion in production capacity and robust demand for nitrile gloves.”

On prospects, Hartalega expressed its confidence in propelling the group forward in the coming year, as it is driven by its strategic expansion plans and product innovation,” Kuan said.

“As we move forward, we are well on track to meet growing global demand, driven by our Next Generation Integrated Glove Manufacturing Complex (NGC). To this end, we have successfully commissioned all 12 production lines in Plant 4 of the NGC. We target to commence commissioning of Plant 5 in July 2018 and subsequently, the construction of Plant 6. We are also planning to construct an additional Plant 7, which will focus on small orders and specialty products,” Kuan added.

Additionally, Hartalega is also set to launch its antimicrobial gloves in Europe on May 31, 2018, Kuan said.

“We are also currently in the process of securing approval from the Federal Drug Administration to enter the US market with this latest product,” Kuan added.

Hartalega shares closed unchanged at RM6 today, with 4.9 million shares traded, giving it a market capitalisation of RM20.14 billion.


http://www.theedgemarkets.com/article/hartalega-4q-net-profit-30

Hartalega - FY18… a Slight Anti-climax
Author: HLInvest | Publish date: Wed, 16 May 2018, 09:39 AM

Hartalega’s FY18 Core PATAMI of RM399.0m (+23.2% yoy) was below our expectation and consensus. Production capacity rose to 28.5bn with a utilization rate of 91% in FY18. Our forecast is unchanged and we maintain our HOLD rating albeit with a higher TP of RM6.17. We expect the share price will be supported by (i) it’s possible inclusion into the KLCI come June review (ii) sentiment driven weakness in the Ringgit will continue to whet investors’ appetite for export stocks.

Below expectations. FY18 core PATAMI of RM399.0m (+23.2% yoy) came in below at 94% and 92.4% of ours and consensus full year estimates, respectively. The lower than expected results were due to higher (i) energy costs (natural gas) (ii) butadiene prices and (iii) finance costs.

Dividends. Declared a third interim dividend of 2 sen/share (FY17: 8 sen/share).

YTD. Revenue grew 32.1% yoy to RM2.41bn on the back increased sales volume (+33% yoy), greater operational efficiencies and a higher utilization rate (FY18: 91% vs. FY17: 87%). EBITDA margins expanded by 2.8ppts (FY17: 23% vs. FY18: 25.8%). Subsequently, core PATAMI grew 23.2% yoy to RM398.0m on the above mentioned factors.

Yoy. Revenue grew 17.0% to RM616.8m on higher sales volume (+30.1%). EBITDA margin declined marginally by 0.2ppts to 26% as ASP saw downward pressure, offset by 17 extra lines yoy (4Q18:93 lines vs. 4Q17: 76 lines). Consequently core PATAMI grew by 10.3% yoy to RM98.6m.

Qoq. Revenue grew 2.3% qoq on higher sales volume (+5% qoq). Core PATAMI declined by 7.1% to RM98.6m qoq on competitive pricing whilst utilization rate declined to 89% from 91% qoq.

AMG. Production capacity rose to c.28.5bn pcs in FY18 with the current 93 lines having a utilization rate of 91%. Hartalega will launch their anti-microbial gloves (AMG) in Europe later this month, whilst simultaneously being in the midst of securing FDA approval for the US market. We are of the view that it will take some time for Hartalega to secure orders for its AMG given the products infancy in the market.

Outlook. Commissioning of plant 5 (4.7bn pieces) will commence in June CY18 followed by construction of Plant 6. Hartalega also announced its plans for Plant 7 which has been earmarked for specialty products with a capacity of c.2.6bn pieces. Moving forward we expect utilization rate to remain stable at c.89%-91% on the back of robust global demand, however we may see margin deterioration as more gloves capacity come on stream thus putting a downward pressure on ASP.

Forecast. Unchanged as the results were only marginally below expectations.

Maintain HOLD, TP: RM6.17. Despite the marginal results shortfall, we reckon there are short term sentiment driven factors that may warrant share price support (or even possible upside). These include: (i) possible inclusion into the KLCI come June review (ii) sentiment driven weakness in the Ringgit will continue to whet investors’ appetite for export stocks in the near term. Given such, we adjust our TP upwards to RM6.17 based on CY19 EPS pegged to PER of 37x (from 31.8x). Our ascribed PER of 37x represents 1SD above Hartalega’s 3 year historical PER.

Source: Hong Leong Investment Bank Research - 16 May 2018

Hartalega 23.8.2017

Hartalega		23.8.2017
5 Years Quarterly Report History
Qtr	Financial	Revenue	PBT	PAT	PBT
No	Quarter	(RM,000)	(RM,000)	(RM,000)	Margin
1	30-Jun-17	601,041	115,736	96,386	19.3%
4	31-Mar-17	526,997	118,505	89,427	22.5%
3	31-Dec-16	456,287	78,327	66,226	17.2%
2	30-Sep-16	436,975	83,759	71,215	19.2%
1	30-Jun-16	401,827	68,129	56,176	17.0%
4	31-Mar-16	400,429	71,185	61,717	17.8%
3	31-Dec-15	398,023	91,173	72,786	22.9%
2	30-Sep-15	379,345	75,069	60,411	19.8%
1	30-Jun-15	320,515	79,924	62,681	24.9%
4	31-Mar-15	305,115	67,351	54,935	22.1%
3	31-Dec-14	286,414	68,997	49,517	24.1%
2	30-Sep-14	275,238	64,902	48,160	23.6%
1	30-Jun-14	279,198	75,651	57,087	27.1%
4	31-Mar-14	280,373	70,272	49,157	25.1%
3	31-Dec-13	267,820	74,673	57,876	27.9%
2	30-Sep-13	280,953	82,300	63,273	29.3%
1	30-Jun-13	278,014	81,917	62,912	29.5%
4	31-Mar-13	269,772	81,318	62,293	30.1%
3	31-Dec-12	259,565	78,368	60,529	30.2%
2	30-Sep-12	255,019	76,282	58,597	29.9%
5 Years Trailing 4 Quarters
No.	Financial	ttm-Rev	ttm-PBT	ttm-PAT	ttm-PBT
Qtr.	Quarter	(RM,000)	(RM,000)	(RM,000)	Margin
1	31-Mar-18	2,021,300	396,327	323,254	19.6%
4	31-Mar-17	1,822,086	348,720	283,044	19.1%
3	31-Mar-17	1,695,518	301,400	255,334	17.8%
2	31-Mar-17	1,637,254	314,246	261,894	19.2%
1	31-Mar-17	1,579,624	305,556	251,090	19.3%
4	31-Mar-16	1,498,312	317,351	257,595	21.2%
3	31-Mar-16	1,402,998	313,517	250,813	22.3%
2	31-Mar-16	1,291,389	291,341	227,544	22.6%
1	31-Mar-16	1,187,282	281,174	215,293	23.7%
4	31-Mar-15	1,145,965	276,901	209,699	24.2%
3	31-Mar-15	1,121,223	279,822	203,921	25.0%
2	31-Mar-15	1,102,629	285,498	212,280	25.9%
1	31-Mar-15	1,108,344	302,896	227,393	27.3%
4	31-Mar-14	1,107,160	309,162	233,218	27.9%
3	31-Mar-14	1,096,559	320,208	246,354	29.2%
2	31-Mar-14	1,088,304	323,903	249,007	29.8%
1	31-Mar-14	1,062,370	317,885	244,331	29.9%
4	31-Mar-13	1,032,034	305,882	234,777	29.6%
3	31-Mar-13	1,002,479	289,024	222,496	28.8%
2	31-Mar-13	984,865	274,558	212,670	27.9%
5 Years Adjusted EPS, DPS, NTA and ttm-EPS for capital changes
Shrs m	1644.8	adj	adj	adj	adj	adj
Qtr	Financial	EPS	DPS	NTA	ttm-EPS	ttm-DPS
No	Quarter	(Cent)	(Cent)	(RM)	(Cent)	(Cent)
1	30-Jun-17	5.86	2.5	1.07	19.65	8.49
4	31-Mar-17	5.44	2.0	1.02	17.21	7.99
3	31-Dec-16	4.03	2.0	0.98	15.52	7.99
2	30-Sep-16	4.33	2.0	0.96	15.92	7.98
1	30-Jun-16	3.42	2.0	0.93	15.27	7.98
4	31-Mar-16	3.75	2.0	0.91	15.66	7.97
3	31-Dec-15	4.43	2.0	0.89	15.25	7.39
2	30-Sep-15	3.67	2.0	0.86	13.83	6.81
1	30-Jun-15	3.81	2.0	0.84	13.09	6.23
4	31-Mar-15	3.34	1.4	0.75	12.75	6.07
3	31-Dec-14	3.01	1.4	0.71	12.40	6.23
2	30-Sep-14	2.93	1.4	0.67	12.91	6.40
1	30-Jun-14	3.47	1.8	0.62	13.82	6.57
4	31-Mar-14	2.99	1.6	0.57	14.18	6.52
3	31-Dec-13	3.52	1.6	0.55	14.98	6.49
2	30-Sep-13	3.85	1.6	0.53	15.14	6.47
1	30-Jun-13	3.82	1.8	0.49	14.85	6.46
4	31-Mar-13	3.79	1.6	0.47	14.27	4.67
3	31-Dec-12	3.68	1.6	0.44	13.53	4.44
2	30-Sep-12	3.56	1.6	0.42	12.93	4.21
Capital changes
No.	Financial	No of
Qtr.	Quarter	Shrs (m)
1	30-Jun-17	1644.8
4	31-Mar-17	1640.9
3	31-Dec-16	1643.3
2	30-Sep-16	1640.9
1	30-Jun-16	1642.6
4	31-Mar-16	1641.4
3	31-Dec-15	1639.3
2	30-Sep-15	1637.2
1	30-Jun-15	819.4
4	31-Mar-15	777.0
3	31-Dec-14	774.9
2	30-Sep-14	769.3
1	30-Jun-14	756.1
4	31-Mar-14	741.4
3	31-Dec-13	741.0
2	30-Sep-13	740.0
1	30-Jun-13	735.0
4	31-Mar-13	731.1
3	31-Dec-12	731.0
2	30-Sep-12	731.5
1	30-Jun-12	730.9
4	31-Mar-12	364.3
3	31-Dec-11	364.0
2	30-Sep-11	363.8

Hartalega’s earnings to remain resilient in financial year of 2018

 July 13, 2017, Thursday Sharon Kong, sharonkong@theborneopost.com

KUCHING: Hartalega Holdings Bhd’s (Hartalega) earnings are expected to remain resilient in financial year 2018 (FY18) on the back of new demand coming in from China.

The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) opined that Hartalega’s earnings will remain resilient in FY18 as it expected new demand to come from China due to the switch from vinyl gloves to rubber gloves.

“In addition, the continuous switch in demand for powdered gloves to non-powdered gloves and nitrile gloves has allowed demand to remain resilient,” MIDF Research said.

Furthermore, the research arm opined that revenue will also continue to be supported by the slower growth in the glove industry’s capacity expansion which has provided Hartalega with a more conducive environment to price its product.

It added that this is as opposed to the intense pricing competition last year which caused the glove manufacturers to reduce prices in order to compete for orders.

From the research arm’s observation, MIDF Research noted that natural rubber price have been steadily coming down from its peak of RM8.16 per kilogram (kg) back in February.

“As of June 30, the average price of natural rubber stands at RM5.73 per kg,” it said.

Thus, MIDF Research said Hartalega would have to adjust the group’s average selling prices (ASPs) lower to accommodate for lower raw materials price.

However, despite the expected lower ASPs, the research arm opined that the new capacity from Plant 3 will assist to offset the lower ASPs going forward as demand is expected to remain resilient.

“We understand from the management that the commissioning of the production lines in its Plant 3 of the next generation integrated glove manufacturing complex (NGC) has now been fully-completed.

“It will now move on to the production lines in Plant 4 which will begin commissioning in late July,” the research arm said.

MIDF Research noted that there will be 12 production lines in Plant 4 and Hartalega expects to commission one production line per month.

The research arm further noted that management expects to complete the full-commissioning of Plant 4 by middle of 2018.

With the complete commissioning of Plant 3 of the NGC, MIDF Research opined that Hartalega’s first quarter of FY18 (1QFY18) earnings will replicate the group’s 4QFY17 earnings of about RM85 million to RM90 million.

This is due to the fact that the research arm believed that the ringgit will continue to trade at current level and revenue will continue to be driven by the 24 billion of annual glove production capacity.

“We are also expecting Hartalega to maintain its net margin in the mid-teens in FY18 premised on the abovementioned factors,” the research arm said.

http://www.theborneopost.com/2017/07/13/hartalegas-earnings-to-remain-resilient-in-financial-year-of-2018/

Hartalega

We are expecting the Group to maintain its net profit margin at around 20% despite bracing for headwinds of lower average selling prices (ASP) of gloves.


Earnings outlook/Revision

We lowered our earnings forecast for FY15F by 7% to factor in the lower average selling prices (ASP) of gloves as we expect that the increased competition in the nitrile gloves industry would keep selling prices subdued.

Double-digit earnings growth in FY16F. Earnings forecast for FY16F was nudged marginally higher by 1.5% as we update the installed production capacity figures for FY16. We are expecting FY16F earnings to grow by double-digit on the back of significant earnings contribution from NGC.


Valuation & Recommendation 

Maintain HOLD with a slightly higher target price of  RM7.00 (previous target price: RM6.98), following our upward revision of earnings for FY16F. We derive our target price by pegging FY16 EPS at PER of 16 times.

While we remain convinced on its growth prospect that underpinned by its expansion ahead, we still wary over the stiff competition in the nitrile gloves industry. Yet, we reckon that the high operational efficiency of the Group would aid to mitigate the adverse effect of lower ASP of gloves. Overall, we maintain our neutral view on the company.

JFApex Securities 30.9.2014

HARTA Quarter Report History

No.	Financial		Revenue		Profit Before		Net Profit		EPS	Div	NTA
	Quarter		(RM,000)		Tax (RM,000)		(RM,000)		(Cent)	(Cent)	(RM)	PBTM
1	30/06/2014		279,198		75,651		57,087		7.55	4	1.34	27.1%
4	31/03/2014		280,373		70,272		49,157		6.63	3.5	1.27	25.1%
3	31/12/2013		267,820		74,673		57,876		7.81	3.5	1.23	27.9%
2	30/09/2013		280,953		82,300		63,273		8.55	3.5	1.18	29.3%
1	30/06/2013		278,014		81,917		62,912		8.56	4	1.1	29.5%
4	31/03/2013		269,772		81,318		62,293		8.52	3.5	1.05	30.1%
3	31/12/2012		259,565		78,368		60,529		8.28	3.5	0.99	30.2%
2	30/09/2012		255,019		76,282		58,597		8.01	3.5	0.94	29.9%
1	30/06/2012		247,678		69,914		53,358		7.3	0	0.9	28.2%
4	31/03/2012		240,217		64,460		50,012		13.73	6	1.7	26.8%
3	31/12/2011		241,951		63,902		50,703		13.93	6	1.61	26.4%
2	30/09/2011		229,542		59,551		46,127		12.68	6	1.53	25.9%