Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD
Research House: RHB
Hartalega Holdings Bhd
(May 11, RM5.77)
Maintain market perform at RM5.70 with revised fair value of RM6.19 (from RM6.14): Hartalega's 4QFY11 core net of profit of RM50.8 million (+9.4% year-on-year; +5.9% quarter-on-quarter) came in within our and consensus expectations with FY11 core net profit of RM185.8 million (+30.0% y-o-y) accounting for 101% to 103% of our and consensus estimates.
Q-o-q sales volume grew slightly thanks to the new line in Plant 5. Sales revenue rose 2.3% q-o-q. Core net profit in 4Q rose 5.9% q-o-q, as 4QFY11 earnings before interest and tax (Ebit) margin grew 1.1 percentage points q-o-q.
Hartalega declared a third interim single-tier dividend per share of six sen and a final single-tier DPS of six sen (4QFY10: 10 sen), bringing total year-to-date net DPS of 21 sen (FY10: 20 sen), slightly ahead of our projection of 20 sen.
Management said Plant 6 will house 12 lines (+3 billion pieces per annum), which will produce nitrile gloves. Construction of the new plant will start in June/July 2011, with two lines slated to start production in January 2012. Capital expenditure is around RM120 million, which will be spread over two years and funded by internally generated funds. The expansion will increase Hartalega's annual capacity from eight billion pieces to nine billion by FY12 and 13 billion in FY13.
The risks include higher than expected raw material prices, which may result in margin contraction, and the ringgit appreciating against the US dollar.
Post FY11 results, we have tweaked our FY12 earnings forecast by 0.2% but made no change to our FY13 projections. We introduce our FY14 numbers. We have raised our fair value'' to RM6.19 (from RM6.14), based on an unchanged target CY11 price-earnings ratio of 10.5 times. Hartalega is trading at 9.3 times FY12 PER, a premium to its closest related peer, Kossan Rubber Industries Bhd, on 7.1 times FY11 PER. As the potential upside to our fair value is still in line with our expected market return, we maintain our 'market perform' call on the company. ' RHB Research, May 11
This article appeared in The Edge Financial Daily, May 12, 2011.
Company Name: HARTALEGA HOLDINGS BHD
Research House: RHB
Hartalega Holdings Bhd
(May 11, RM5.77)
Maintain market perform at RM5.70 with revised fair value of RM6.19 (from RM6.14): Hartalega's 4QFY11 core net of profit of RM50.8 million (+9.4% year-on-year; +5.9% quarter-on-quarter) came in within our and consensus expectations with FY11 core net profit of RM185.8 million (+30.0% y-o-y) accounting for 101% to 103% of our and consensus estimates.
Q-o-q sales volume grew slightly thanks to the new line in Plant 5. Sales revenue rose 2.3% q-o-q. Core net profit in 4Q rose 5.9% q-o-q, as 4QFY11 earnings before interest and tax (Ebit) margin grew 1.1 percentage points q-o-q.
Hartalega declared a third interim single-tier dividend per share of six sen and a final single-tier DPS of six sen (4QFY10: 10 sen), bringing total year-to-date net DPS of 21 sen (FY10: 20 sen), slightly ahead of our projection of 20 sen.
Management said Plant 6 will house 12 lines (+3 billion pieces per annum), which will produce nitrile gloves. Construction of the new plant will start in June/July 2011, with two lines slated to start production in January 2012. Capital expenditure is around RM120 million, which will be spread over two years and funded by internally generated funds. The expansion will increase Hartalega's annual capacity from eight billion pieces to nine billion by FY12 and 13 billion in FY13.
The risks include higher than expected raw material prices, which may result in margin contraction, and the ringgit appreciating against the US dollar.
Post FY11 results, we have tweaked our FY12 earnings forecast by 0.2% but made no change to our FY13 projections. We introduce our FY14 numbers. We have raised our fair value'' to RM6.19 (from RM6.14), based on an unchanged target CY11 price-earnings ratio of 10.5 times. Hartalega is trading at 9.3 times FY12 PER, a premium to its closest related peer, Kossan Rubber Industries Bhd, on 7.1 times FY11 PER. As the potential upside to our fair value is still in line with our expected market return, we maintain our 'market perform' call on the company. ' RHB Research, May 11
This article appeared in The Edge Financial Daily, May 12, 2011.
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