FIGURE 1: HARTALEGA
HOLDINGS BERHAD LAST 5 YEARS SHARE PRICE TREND
**analysis
based on 2020 annual report.
1. GENERAL
INTRO: Hartalega Holdings is a holding company whose subsidiaries
manufacture and sell a variety of nitrile and latex gloves.
2.
NOTABLE
POINTS:
a. HARTALEGA
is known to be the largest nitrile glove producer in the world, with 90% of
sales in nitrile gloves. Its main client base comprise of clients from North
America (51.3%) and Europe (25.3%), in addition to newly secured clientele from the Russian Market and so on.
b. For
FY2020, Hartalega registered a higher profit before tax of RM555.4 million,
while revenue increased to RM2.9 billion. However, the Group recorded a lower
profit after tax of RM434.4 million compared to RM454.9 million in the previous
year. This was largely due to higher deferred tax expense incurred during the
financial year. Intense competition and higher operational costs also put
pressure on margins, although this was mitigated as market demand normalised in
the latter half of the year. Based on its solid performance, Hartalega
maintained its position as a component stock of the FBM KLCI, comprising
Malaysia’s top 30 largest public listed companies.
c. HARTALEGA
implements a dividend policy that distributes a minimum of 60% of its annual
net profit to its shareholders.
d. Investment
in capital expenditure for the year amounted to RM251.1 million, primarily
utilised for expansion of the new manufacturing facilities. Its newest
manufacturing facilities operate the fastest and most efficient glove
production lines in the world, running at 45,000 pieces per hour, whereby its
current installed capacity is up to 39.3 billion pieces per annum, with its
manufacturing facilities operating at a high utilisation rates of above 85%.
HARTALEGA also pioneered the use of empty oil palm fruit bunches as biomass
fuel to generate heat for production processes, which reduces energy costs.
3.
IS
THIS COUNTER A STRONG GROWTH STOCK?
a. REVENUE
RANGE (RM million): 2924.3 million as reported in 2020 annual report, this is a
high revenue company.
b. SHARE
PRICE: from 2016-2021, share price surged from around RM5.00 to a peak of more
than RM20.00 at the start of the COVID-19 pandemic and then subsequently
dropped back to current level of around RM12.70.
c. EARNING
PER SHARE (EPS): earning per share in last 5 years was overall steady, which
ranged from 7.85 to 13.69 sen, except for FY2021, the increased gloves demand
brought about by the COVID-19 pandemic enabled HARTALGA to realise an earning per
share of up to 55.18 sen.
d. PRICE
TO EARNINGS (P/E) RATIO: current P/E ratio is at 23.13, which is reasonable in
view of the counter’s future earning potential.
e. FUTURE
POTENTIAL/PROSPECTS: share price expect to be stable in the next few years
f. CAPITAL EXPENDITURE (CAPEX): spending on
purchase of new fixed assets and other investments amount to about RM 251.4
million, which is around 8% of total assets.
4.
IS
THIS A STRONG DIVIDEND STOCK?
a. DIVIDEND
YIELD: in 2020 financial year, HARTALEGA declared a dividend payout of 7.75 sen
per share to shareholders, which amounts to a dividend yield of 0.61%.
b. DIVIDEND
PAYOUT RATIO: The FY2020 dividend amounts to about 60% of its total earnings. In
the last five years, HARTALEGA’s dividend payout ratio has been consistently
above 60% of its total earnings.
c. CONSISTENCY:
This counter’s dividend payout has been very consistent, the dividend paid to
shareholders in the last five years ranged from 7.75 to 11.7 sen.
5.
IS
THE MANAGEMENT PERFORMANCE GOOD?
a. RETURN
ON EQUITY (ROE): in 2020 financial year, HARTALEGA reported a good return of
shareholders’ equity, at 17.08%. This was significantly increased to 45% in
FY2021 due to the increase in earnings.
b. COST-TO-INCOME
RATIO: the cost-to-income ratio is 426%, which is relatively low compared to
other manufacturers in the same category. This is partly contributed by
HARTALEGA’s implementation of empty oil palm fruit bunches as biomass fuel to
generate heat for its production processes, which reduces energy costs.
c. DEBT-TO-EQUITY
(GEARING) RATIO: Its gearing ratio is at 30%, whereby its debt level is significantly
less than its equity, resulting in a strong and healthy balance sheet.
6.
OTHER
INDICATORS:
a. CASH
FLOW: cash flow is positive, at around RM 305.1 million, equivalent to RM 0.09 per
share.
b. SUPPORT BY INSTITUTIONAL INVESTORS: this counter
is well supported by institutional investors, there are institutional investors
at top 30 major shareholders list, including EPF (2.09%), KUMPULAN WANG
PERSARAAN (2.53%) as well as multiple investment funds and insurance funds. Its
major shareholder is Hartalega Industries Sdn Bhd (47.77%).
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