Vous êtes sur la page 1sur 3

Maybank IB Research

PP16832/01/2012 (029059)

Results Review

10 August 2011

Hartalega Holdings
Buy (unchanged)
Share price: Target price: RM5.39 RM6.80 (unchanged)

Recession play, with capital upside


Good results. 1QFY12 net profit of RM55m (+5% QoQ, +32% YoY) made up 26% of our and consensus full-year forecasts. In our view, Hartalega is a safe haven amid a market meltdown: (i) medical glove demand is recession proof; and (ii) dividend yield is high at 5% net. Downside to share price is also capped by its completely undemanding CY12 PER of 9x (vs. Top Gloves 5-year average of 15x). Hartalega remains our top pick (TP: RM6.80) and we advocate investors to accumulate the stock amid weakness in the broader market. Driven by higher sales volume. Company continues to outperform its peers by reporting net profit expansion to RM55m (+5% QoQ, +32% YoY) in 1QFY12, on the back of higher sales volume (+9% QoQ, +35% YoY). Though NBR cost went up 27% QoQ and nitrile glove ASP was hardly raised, EBIT margin only contracted 2-ppt to 32%. This was due to the reaping of efficiency gains from its new Plant 5 (i.e. higher productivity and lower fixed costs). Additionally, earnings were also unscathed by the weaker USD due to the companys favorable hedging policy. No dividend was declared, as expected. Strong nitrile demand in Europe. The ongoing ASP-led demand switch to nitrile glove (from latex) in Europe is aggressive. We estimate that sales volume to Europe grew by 40% QoQ and Europe now accounts for 28% of Hartalegas sales revenue (4QFY11: 22%).

Lee Yen Ling lee.yl@maybank-ib.com (603) 2297 8691

Description: OEM gloves manufacturer. Information: Ticker: Shares Issued (m): Market Cap (RM m): 3-mth Avg Daily Volume (m): KLCI: Major Shareholders: Hartalega Industries Budi Tenggara SB HART MK 363.8 1,960.9 0.24 1,472.14 % 50.6 5.0

Flattish sequential earnings ahead. Earnings momentum may slow in the coming quarters as: (i) the company may absorb some of the cost inflation to keep its ASP competitive; and (ii) little sales volume upside (plants are close to full utilization level). Our earnings model has already provided for a 4-5-ppt EBITDA margin contraction (from FY11) in FY12-13. Nevertheless, YoY earnings growth forecast of 9-15% in FY12-13 is still remarkable, despite coming from a high base. Awaiting paradigm shift. Hartalega is now the new bellwether of the glove sector, with its profitability double of Top Gloves yet PER is 40% below Top Gloves 5-year average. We believe it is just a matter of time before market is convinced of Hartalegas newly-gained leadership status. We think any share price weakness presents good buying opportunity. Also, investors will be rewarded with quarterly dividend payout in 2Q-4QFY12.
Hartalega Summary Earnings Table
FYE Mar (RM m) Revenue MaMacDeDecDDeFYEMont EBITDA hAbbr (RM m) Recurring Net Profit Recurring Basic EPS (Sen) EPS growth (%) DPS (Sen) PER EV/EBITDA (x) Div Yield (%) P/BV(x) Net Gearing (%) ROE (%) ROA (%) Consensus Net Profit (RM m) Source: Maybank IB 2010A 571.9 199.9 142.9 39.3 69.1 13.3 13.7 9.6 2.5 5.5 Cash 40.3 30.0 2011A 734.9 267.9 190.3 52.3 33.1 21.0 10.3 7.0 3.9 4.0 Cash 38.5 30.1 2012F 924.0 296.6 207.9 57.2 9.2 25.7 9.4 6.3 4.8 3.2 Cash 34.2 27.5 209.3 2013F 1,073.9 339.4 235.7 64.8 13.4 29.2 8.3 5.4 5.4 2.7 Cash 31.9 26.6 237.1 2014F 1,306.6 412.9 290.4 79.9 23.2 35.9 6.7 4.2 6.7 2.2 Cash 32.3 27.8 283.2

Price Performance: 52-week High/Low

RM6.08/RM4.04

1-mth (4.1)

3-mth (1.8)

6-mth 5.7

1-yr 1.3

YTD 0.9

Price Chart (RM5.39)


6.5 5.5 4.5 3.5 2.5 1.5 0.5
Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11

HART MK Equity

Description: OEM gloves manufacturer.

Hartalega Holdings Hartalega: Results Summary Table


FY Mar (RM m) Turnover EBIT Net interest exp Pre-tax profit Tax Minority Interest Net profit 1QFY12 219.4 70.9 (0.2) 70.7 (15.9) 0.0 54.8 1QFY12 EBIT margin (%) Tax rate (%) Source: Company, Maybank-IB 32.3 22.5 1QFY11 170.0 53.8 0.0 53.8 (12.3) (0.0) 41.5 1QFY11 31.6 22.9 % YoY 29.1 31.8 n.m. 31.4 29.3 n.m. 32.1 +/- ppt 0.7 (0.4) 4QFY11 192.5 66.7 (0.4) 66.3 (13.9) 0.0 52.4 4QFY11 34.6 20.9 % QoQ 13.9 6.3 (45.8) 6.6 14.9 n.m. 4.5 +/- ppt (2.3) 1.6

INCOME STATEMENT (RM m) FYE Mar Revenue EBITDA Depreciation & Amortisation Operating Profit (EBIT) Interest (Exp)/Inc Associates One-offs Pre-Tax Profit Tax Minority Interest Net Profit Recurring Net Profit Revenue Growth % EBITDA Growth (%) EBIT Growth (%) Net Profit Growth (%) Recurring Net Profit Growth (%) Tax Rate % 2011A 734.9 267.9 (25.0) 242.9 (0.1) 0.0 0.0 242.8 (52.5) (0.0) 190.3 190.3 28.5 34.0 34.9 33.2 33.2 21.6 2012F 924.0 296.6 (31.0) 265.6 0.9 0.0 0.0 266.5 (58.6) 0.0 207.9 207.9 25.7 10.7 9.4 9.2 9.2 22.0 2013F 1,073.9 339.4 (39.0) 300.4 1.7 0.0 0.0 302.2 (66.5) 0.0 235.7 235.7 16.2 14.4 13.1 13.4 13.4 22.0 2014F 1,306.6 412.9 (44.3) 368.6 3.7 0.0 0.0 372.4 (81.9) 0.0 290.4 290.4 21.7 21.7 22.7 23.2 23.2 22.0

BALANCE SHEET (RM m) FYE Mar Fixed Assets Other LT Assets Cash/ST Investments Other Current Assets Total Assets ST Debt Other Current Liabilities LT Debt Other LT Liabilities Minority Interest Shareholders' Equity Total Liabilities-Capital Share Capital (m) Net Debt/(Cash) Working capital 2011A 348.6 0.2 117.0 165.4 631.3 14.5 60.9 24.4 36.8 0.4 494.3 631.3 363.6 Cash 108.3 2012F 407.7 0.2 144.4 203.8 756.1 14.5 71.4 24.4 36.8 0.4 608.6 756.2 363.6 Cash 136.2 2013F 488.7 0.2 160.9 236.9 886.7 14.5 82.3 14.4 36.8 0.4 738.3 886.8 363.6 Cash 158.3 2014F 524.4 0.2 230.6 288.2 1,043.5 14.5 99.3 (5.6) 36.8 0.4 898.0 1,043.5 363.6 Cash 192.6

CASH FLOW (RM m) FYE Mar Profit before taxation Depreciation Net interest receipts/(payments) Working capital change Cash tax paid Others (incl'd exceptional items) Cash flow from operations Capex Disposal/(purchase) Others Cash flow from investing Debt raised/(repaid) Equity raised/(repaid) Dividends (paid) Interest payments Others Cash flow from financing Change in cash Sources: Company, Maybank IB 2011A 242.8 25.0 0.1 (41.7) (47.8) 4.2 182.5 (81.3) 0.2 0.0 (81.1) 0.3 1.0 (56.9) (0.1) (1.0) (56.8) 44.7 2012F 266.5 31.0 (0.9) (27.9) (58.6) 0.0 210.1 (90.0) 0.0 0.0 (90.0) 0.0 2.0 (93.6) 0.9 (2.0) (92.7) 27.4 2013F 302.2 39.0 (1.7) (22.1) (66.5) 0.0 250.8 (120.0) 0.0 0.0 (120.0) (10.0) 3.0 (106.1) 1.7 (3.0) (114.3) 16.5 2014F 372.4 44.3 (3.7) (34.3) (81.9) 0.0 296.7 (80.0) 0.0 0.0 (80.0) (20.0) 4.0 (130.7) 3.7 (4.0) (146.9) 69.7

RATES & RATIOS FYE Mar EBITDA Margin % Op. Profit Margin % Net Profit Margin % ROE % ROA % Net Margin Ex. El % Dividend Cover (x) Interest Cover (x) Asset Turnover (x) Asset/Debt (x) Debtors Turn (days) Creditors Turn (days) Inventory Turn (days) Net Gearing % Debt/EBITDA (x) Debt/Market Cap (x) 2011A 36.4 33.1 25.9 38.5 30.1 25.9 2.5 77.0 1.2 16.2 48.1 26.7 32.3 Cash 0.1 0.0 2012F 32.1 28.8 22.5 34.2 27.5 22.5 2.2 86.8 1.2 19.4 48.1 26.7 32.3 Cash 0.1 0.0 2013F 31.6 28.0 21.9 31.9 26.6 21.9 2.2 112.8 1.2 30.6 48.1 26.7 32.3 Cash 0.1 0.0 2014F 31.6 28.2 22.2 32.3 27.8 22.2 2.2 249.0 1.3 116.2 48.1 26.7 32.3 Cash 0.0 0.0

10 August 2011 Page 2 of 3

Hartalega Holdings

Definition of Ratings
Maybank Investment Bank Research uses the following rating system: BUY HOLD SELL Total return is expected to be above 10% in the next 12 months Total return is expected to be between -5% to 10% in the next 12 months Total return is expected to be below -5% in the next 12 months

Applicability of Ratings
The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investm ent ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies.

Some common terms abbreviated in this report (where they appear):


Adex = Advertising Expenditure BV = Book Value CAGR = Compounded Annual Growth Rate Capex = Capital Expenditure CY = Calendar Year DCF = Discounted Cashflow DPS = Dividend Per Share EBIT = Earnings Before Interest And Tax EBITDA = EBIT, Depreciation And Amortisation EPS = Earnings Per Share EV = Enterprise Value FCF = Free Cashflow FV = Fair Value FY = Financial Year FYE = Financial Year End MoM = Month-On-Month NAV = Net Asset Value NTA = Net Tangible Asset P = Price P.A. = Per Annum PAT = Profit After Tax PBT = Profit Before Tax PE = Price Earnings PEG = PE Ratio To Growth PER = PE Ratio QoQ = Quarter-On-Quarter ROA = Return On Asset ROE = Return On Equity ROSF = Return On Shareholders Funds WACC = Weighted Average Cost Of Capital YoY = Year-On-Year YTD = Year-To-Date

Disclaimer
This report is for information purposes only and under no circumstances is it to be considered or intended as an offer to sell or a solicitation of an offer to buy the securities referred to herein. Investors should note that income from such securities, if any, may fluctuate and that each securitys price or value may rise or fall. Opinions or recommendations contained herein are in form of technical ratings and fundamental ratings. Technical ratings may differ from fundamental ratings as technical valuations apply different methodologies and are purely based on price and volume-related information extracted from Bursa Malaysia Securities Berhad in the equity analysis. Accordingly, investors may receive back less than originally invested. Past performance is not necessarily a guide to future performance. This report is not intended to provide personal investment advice and does not take into account the specific investment objectives, the financial situation and the particular needs of persons who may receive or read this report. Investors should therefore seek financial, legal and other advice regarding the appropriateness of investing in any securities or the investment strategies discussed or recommended in this report. The information contained herein has been obtained from sources believed to be reliable but such sources have not been independently verified by Maybank Investment Bank Bhd and consequently no representation is made as to the accuracy or completeness of this report by Maybank Investment Bank Bhd and it should not be relied upon as such. Accordingly, no liability can be accepted for any direct, indir ect or consequential losses or damages that may arise from the use or reliance of this report. Maybank Investment Bank Bhd, its aff iliates and related companies and their officers, directors, associates, connected parties and/or employees may from time to time have positions or be materially interested in the securities referred to herein and may further act as market maker or may have assumed an underwriting commitment or deal with such securities and may also perform or seek to perform investment banking services, advisory and oth er services for or relating to those companies. Any information, opinions or recommendations contained herein are subject to change at any time, without prior notice. This report may contain forward looking statements which are often but not always identified by the use of words such as anticipate, believe, estimate, intend, plan, expect, forecast, predict and project and statements that an event or result may, will, can, should, could or might occur or be achieved and other similar expressions. Such forward looking statements are based on assumptions made and information currently available to us and are subject to certain risks and uncertainties that could cause the actual results to differ materially from those expressed in any forward looking statements. Readers are cautioned not to place undue relevance on thes e forwardlooking statements. Maybank Investment Bank Bhd expressly disclaims any obligation to update or revise any such forward looking statements to reflect new information, events or circumstances after the date of this publication or to reflect the occurrenc e of unanticipated events. This report is prepared for the use of Maybank Investment Bank Bhd's clients and may not be reproduced, altered in any way, transmitted to, copied or distributed to any other party in whole or in part in any form or manner without the prior express written consent of Maybank Investment Bank Bhd and Maybank Investment Bank Bhd accepts no liability whatsoever for the actions of third parties in this respect. This report is not directed to or intended for distribution to or use by any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Published / Printed by

Maybank Investment Bank Berhad (15938-H) (A Participating Organisation of Bursa Malaysia Securities Berhad) 33rd Floor, Menara Maybank, 100 Jalan Tun Perak, 50050 Kuala Lumpur Tel: (603) 2059 1888; Fax: (603) 2078 4194 Stockbroking Business: Level 8, MaybanLife Tower, Dataran Maybank, No.1, Jalan Maarof 59000 Kuala Lumpur Tel: (603) 2297 8888; Fax: (603) 2282 5136 http://www.maybank-ib.com

10 August 2011 Page 3 of 3