Another record profit for Hartalega

Business & Markets 2013
Written by BIMB Securities
Thursday, 09 May 2013 10:10
A + / A - / Reset

HARTALEGA HOLDINGS BHD []
(May 8, RM5.56)
Maintain neutral at RM5.45 with a revised target price of RM5.80:
Hartalega’s revenue improved by 3.9% quarter-on-quarter (q-o-q) and
earnings by 3.1% q-o-q mainly due to the increase in production volume.
The earnings before interest and tax margin remains stable given that
there were no fluctuations in latex and nitrile prices.
We have increased our 2014 financial year ending March (FY14) net
earnings forecasts to RM255.2 million (1.8%) and RM285.2 million
(7.9%) for FY15 by changing our estimates in product mix. The balance
sheet remains solid with net cash per share of 23 sen. Hartalega
declared its third interim dividend of 3.5 sen (single-tier). We expect a
total dividend of 14 sen to be paid for FY13 based on a payout ratio of
more than 40%, which would translate into a yield of 2.6%. We forecast a dividend of 16 sen for FY14, translating into a yield
of 2.9%.
Our target price is revised to RM5.80 based on calendar year 2013 earnings per share of 34.1 sen over its three-year rolling
average price-earnings ratio of 17 times. Without much potential upside, we maintain our “neutral” rating. Nonetheless, we
believe Hartalega has the strongest fundamentals among all local glove companies and recommend investors accumulate on
weakness. — BIMB Securities, May 8