Hartalega / Kuan Kam Hon

Hartalega / Kuan Kam Hon

Postby winston » Wed May 11, 2011 10:35 am

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Valuation/Recommendationï‚·

Reiterate BUY. We have a target price of RM7.90, based on 13x FY12F PE (equivalent to Top Glove's long-term mean).

Our target price is lowered marginally from RM8.12 as margins could come off slightly in FY12. We also introduce our FY14 estimate.

Hartalega should trade at a premium to peers because of its advantageous positioning in synthetic gloves and also owing to Mr Kuan Mun Hon, the shareholder-manager of Hartalega, hands-on management.

Nevertheless, prevailing sentiment on this sector remains weak...

Hence, its fair valuation may remain depressed until natural rubber glove players fortunes turn the corner, which is a window of opportunity to accumulate.

Hartalega is currently valued cheaply at 9x forward PE after taking into consideration an ROE in excess of 38%, high cash generation, decent expected yield of 4%, superior margins, and pricing/market leadership in a niche segment.

Source: UOBKH
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Re: Hartalega

Postby winston » Sat Aug 02, 2014 5:15 am

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May 5, 2014

Hartalega remains at ‘hold’

HARTALEGA HOLDINGS BHD By JF Apex Securities

Hold (maintained)
Target price: RM6.85

HARTALEGA is poised to conclude its financial year 2014 by releasing the fourth quarter ended March 31 result on May 6.

JF Apex said it expected Hartalega’s revenue to be flattish quarter-on-quarter as the recovery in utilisation rate was offset by the lower average selling price (ASP) due to the decline in raw material prices.

Net earnings wise, the research house gathered that the figures could be below the house and market expectations at between RM50mil and RM55mil as the profit margins continued to fall.

On a full year basis, JF Apex said it expected the Hartalega’s FY14 net earnings to be driven up slightly to between RM235mil and RM240mil or less than 3% year-on-year (against FY13: RM233.6mil).

It attributed the lacklustre yearly earnings growth to the rising operating costs (higher wages and electricity costs), heightening competition, and higher depreciation cost for its Plant 6.

JF Apex said as a result of hike in wages and electricity costs, glove makers in Malaysia were bracing themselves for another cost inflation after the announcement of 20% gas tariff hike effective May 1.

It expected the tariff revision to add up circa RM2mil to Hartalega’s gas bill which stood at circa RM12mil per annum, while the group intended to increase its ASP by 1% to 1.5% to pass through the additional costs.

Source: The Star
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Re: Hartalega

Postby winston » Sat Aug 02, 2014 5:24 am

Hartalega presses on as competition intensify BY YVONNE TAN
March 15, 2014

OVERCAPACITY is a term used very much in the glove industry these days. That and rising costs of production.

In fact, the industry has been wrought by more negativity than “positivity” in the past couple of years, a different scenario compared to years ago when competition was much less.

Hartalega Holdings Bhd probably knows this better than anyone else as the company is pretty much one of the most technologically advanced glove makers globally and the first in the world to launch “thin” nitrile gloves, deemed more suitable for surgical operations than the usual “thicker” gloves.

Comparatively, its fastest production lines are able to churn out 45,000 pieces of gloves per hour while its peers operate their fastest lines at an average of about 30,000 pieces of gloves per hour, according to its managing director Kuan Mun Leong.

Malaysian glove makers which control more than half of the world’s glove supply had a few years ago switched to producing more nitrile gloves from rubber gloves in line with stronger natural rubber prices.

Thai glove makers are also upping their game.

“We anticipated early on that competition in the nitrile glove market would intensify and in order to mitigate this, we charted a counter strategy,” Kuan, the 38-year old second generation head honcho tells StarBizWeek.

“While our counter strategy is focused on earnings per share growth, we stand to experience huge gains in productivity as we embark on aggressive expansion.”

Kuan who took over the reins from his father – founder Kuan Kam Hon – in November 2012 appears unperturbed that Hartalega’s net profit margin of 21.7% may erode further given that its peers who are also hoping to cash in on the growing demand for nitrile gloves are busy ramping up production capacity.

However, the firm already reported a lower net profit of RM57.8mil for its third quarter ended Dec 31 compared with the RM60.5mil achieved in the previous corresponding quarter, citing a reduction in its operating profit margin, due to lower average selling prices as well as higher staff costs.

For the nine-month period ended Dec 31 however, its net profit rose to RM184mil from RM172.4mil in the previous corresponding period. Revenue increased to RM826.7mil from RM762.2mil.

At 21.7%, it also very possibly still enjoys the pole position in terms of margins.

“I don’t want to comment on margins but our margins remain good not because we produce mostly nitrile gloves as opposed to rubber gloves but because of our strong productivity and the high output of our lines.”

Kuan was once quoted in a 2010 Forbes article as saying that if the company was pushed to the corner, “we have the margins to defend our position.”

Right now, Hartalega’s nitrile glove production capacity is close to 14 billion pieces of glove per annum, making it possibly the largest nitrile glove player in the world.

More than 90% of its current product mix comprise nitrile gloves, which are known to fetch better profit margins compared to rubber gloves.

Next Generation

“Despite the increasing competition in the nitrile glove market, based on our strong track record we are confident that Hartalega’s profit margins will remain above the industry average (which is below 20%), underpinned by our production technology and innovation.”

Kuan says it is its first mover advantage coupled with innovation capability that has resulted in higher profits for the group for a long time.

“But we did anticipate that industry players would come into the domain (nitrile gloves) that we created.”

In fact, the company had predicted three years ago that competition would heighten, and since then it has communicated to all stakeholders that Hartalega would not continue to maintain profitability levels similar to previous years.

By the time its RM2bil Next Generation Integrated Glove Manufacturing Complex (NGC) in Sepang which will be ready to start its first production line by the fourth quarter is fully completed over an eight-year period, Hartalega’s total installed capacity will increase substantially to 42 billion pieces per annum.

“The NGC is set to provide average year-on-year capacity growth of 15% per annum for the next eight years,” he says.

“The nitrile glove market specifically has been growing at a rate of 20% to 30% for the past few years and we expect this robust growth to continue with an estimated growth rate of 15% to 20% for the next two years.”

Hartalega is taking a “mid-term view” and anticipates that new nitrile capacities coming on stream in the next two years will be taken up by the growing demand in the nitrile glove market.

“Although we are concerned that average selling price continues to impact Hartalega’s top-line, the timing of the incoming NGC capacity should sustain the group’s earnings,” PublicInvest Research tells clients.

Meanwhile, increasing healthcare awareness on a global scale – that is what will continue to fuel the demand for gloves, Kuan says matter-of-factly.

He points out that China’s per capita consumption of glove is 4-10 pieces per capita, compared to the United States where per capita consumption is 140 pieces, suggesting a huge potential exists in the world’s most populous country.

“Hypothetically, if China’s per capita consumption of gloves reaches a level that is similar to the US, it will have a market size of 180 billion pieces per annum, more than the current global glove market size of 150 billion pieces per annum (of which 40% is nitrile).”

Similarly, Hartalega sees “great potential” in India and had set up a distribution centre there last year.

Not quite as optimistic when it comes to preserving margins, one of Hartalega’s competitors Supermax Corp Bhd recently said it expected this year to be challenging given cost and selling price pressures.

As quoted by a local daily, Supermax executive chairman and group managing director Datuk Seri Stanley Thai said the company enjoyed margins of 15% to 16%, but given the capacity that was expected to come onstream coupled with rising costs, he expected to see margins coming down to 9% to 11%.

He predicted glove makers with the highest margins and selling prices would be the ones to suffer the most as customers would have the choice to switch due to overcapacity.

However, like Kuan, Thai expects demand for nitrile gloves to continue to be strong even as the price of latex, the main raw material for rubber gloves, continues to be volatile.

“The technology revolution of the glove industry will continue. We believe the sector will soon be a high-tech industry and we intend to continue to lead the way in innovations,” Kuan says.

Hartalega shares closed 3 sen lower at RM6.78 yesterday.

Source: The Star
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Re: Hartalega

Postby winston » Tue Aug 05, 2014 7:53 am

Nitrile gloves demand set for growth on rising healthcare concerns BY DANIEL KHOO

PETALING JAYA: The demand for nitrile gloves is expected to remain robust and can offset any possible margin compressions in the industry, according to Hartalega Holdings Bhd executive chairman Kuan Kam Hon.

“The industry as a whole is poised for growth, with tremendous potential in emerging markets due to rising global healthcare awareness and healthcare reforms.

“The rubber glove market in Brazil is expanding due to easing regulations for rubber gloves imports, while China’s healthcare reform is set to catalyse its healthcare industry,” Kuan said in the company’s latest annual report.

He said the outlook was bullish for the sustainable long-term growth of the group.

“We see great potential for us to capitalise on the opportunities inherent in the market,” he added. He also noted that for the first time, the nitrile gloves segment had taken the lead and surpassed natural rubber with a demand ratio of 51% to 49%.

“Although European importers must now pay 2% to 2.7% for glove imports from Malaysia, the fact that nitrile glove exports from Malaysia to the European Union increased by 30.3% in 2013 clearly indicates the robust demand for nitrile,” Kuan said.

Hartalega’s margins of around 21% for the financial year ended May 31, 2014 (FY14) remained above the industry average, despite the downward pressure on average selling prices with increased electricity and maintenance costs.

“This was also despite a higher tax rate of 24.4% for the year under review from 23.1% in the previous year as we have fully utilised our reinvestment allowance tax incentives,” he said.

Despite some of these cost increases and contraction in margins on strong competition, the company, which presently supplies 14% of the global demand of nitrile gloves, is still able to hold on to a price premium in the nitrile glove segment.

Moving forward, Kuan noted that the resilient demand for nitrile gloves will certainly augur well for it on the back of increasing industry utilisation rates.

The industry outlook has also been bolstered, as glove manufacturers across the board are building up their nitrile production capacity, he added.

Healso noted that its next-generation integrated glove manufacturing complex (NGC) will increase capacity byabout 15% year-on-year to more than 42 billion pieces per year.

“The NGC will establish a total of six manufacturing plants and 72 technologically advanced production lines.

“We expect the NGC’s productivity to be 70% higher than our current set-up,” Kuan said. He said that it was on track to commission the first production line for the NGC by the end of this year, and was now constructing plants 1 and 2 with supporting facilities on the piece of land that it had acquired last year.

Hartalega’s shares climbed six sen to close at RM6.71 yesterday.


Source: The Star
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Re: Hartalega

Postby winston » Wed Aug 06, 2014 5:50 am

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Hartalega earnings slip on lower glove prices, higher costs BY JOSEPH CHIN

KUALA LUMPUR: Nitrile rubber glove maker Hartalega Holdings Bhd's earnings fell 9.2% to RM57.08mil in the first quarter ended June 30, 2014 as its operating profit margins shrank.

Announcing its results on Tuesday, it did not anticipate a price war. Operating profit margin reduced [b]from 31.0% to 25.9% [/b]due to a decline in average selling price, higher electricity tariff, natural gas tariff and maintenance cost.

Hartalega's [b]revenue was up just 0.4% [/b]to RM279.19mil from RM278.01mil in line with the group's continuous expansion of production capacity and higher demand.

Earnings per share were 7.55 sen compared with 8.56 sen a year ago. It declared an interim dividend of four sen a share, similar to a year ago.

When compared with the fourth quarter ended March 31, 2014, the group's revenue slipped 0.4% though profit before tax was 7.7% higher.

Hartalega said its operating profit margin increased from 23.9% to 25.9% due to a reduction in maintenance cost and production consumables, mainly due to better operational efficiency.

On its prospects, it said the global demand for nitrile rubber gloves continued to grow at a high rate of over 19% due mainly to switching momentum from latex to nitrile rubber gloves.

"This has spurred an increase of nitrile capacity by the industry which we are confident would be more than matched by strong nitrile glove demand.

"Furthermore, we do not expect price war as claimed by certain quarters as global demand growth continues to be strong.

"However, average selling price will be lower from declining raw material price and more competitive product selling price. The lower selling price and sustaining demand will support efforts to open new markets," it said.

Hartalega had also embarked on its next generation integrated glove manufacturing complex (NGC). Under this plan, it will build six high capacity manufacturing plants with 72 production lines.

It targets to add another 28.5 billion pieces "aggregating to total installed capacity" of over 42 billion pieces per year when the NGC project is completed.

"The total budgeted project cost including land cost is about RM2.26 billion and is targeted to complete up to eight years. The group will finance the NGC project via internal funds, conversion of portion of its warrants and bank borrowings," it said.

Source: The Star
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Re: Hartalega

Postby winston » Thu Aug 28, 2014 3:30 am

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Hartalega to expand glove output BY ISABELLE LAI

KUALA LUMPUR: Rubber glove maker Hartalega Holdings Bhd expects its top line growth to remain flat for its financial year ending March 31, 2015, as its operations are currently running at full production capacity.

Its executive chairman Kuan Kam Hon said however that production was expected to go up by another five billion pieces in the financial year 2016, bringing the total capacity projection to around 18 billion pieces.

“The five billion pieces represent about 40% of our existing production capacity of around 12 billion pieces. So, obviously, our bottom line will grow in absolute terms,” he told reporters after the group AGM yesterday.

Hartalega, the world’s largest synthetic glove manufacturer, registered its highest turnover to date of RM1.1bil for its financial year ended March 31.

For its first quarter ended June 30, it registered a lower net profit of RM57.1mil compared with RM62.9mil a year earlier and increased revenue of RM279.2mil from 278mil.

This increase in production capacity will begin from November, when the first two production lines at its new next generation integrated glove manufacturing complex (NGC) begin operations.

The NGC is expected to provide average year-on-year capacity growth of 15% per annum over the next eight years, with total production capacity increasing to 42 billion pieces per annum once fully completed.

For the financial year 2015, Kuan said Hartalega was expected to take a 2% to 3% hit to its profit margin due mainly to internal costs spent on NGC, including on staff training for the managers and engineers who would be based there.

Hartalega managing director Kuan Mun Leong said that despite the challenging economic climate and impact of lower average selling prices, the group’s results were buoyed by the robust demand for nitrile gloves.

He said this demand had outpaced the demand for natural rubber gloves for the first time last year and was expected to continue growing at around 15% over the next two years.

During the AGM, the group recommended a final single-tier dividend of 4 sen per share, bringing the total dividend paid out for its financial year 2014 to 14.5 sen per share.

Source: The Star
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Re: Hartalega

Postby winston » Thu Oct 02, 2014 8:05 am

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25 Sep 2014: BST DJ World's Largest Maker of Synthetic Rubber Gloves on Target

0937 GMT [Dow Jones] The world's largest producer of nitrile, or synthetic rubber, gloves, Hartalega Holdings Bhd (5168.KU), says its next-generation manufacturing complex expansion is on track with the first two lines targeted to begin operations in mid-November.

This, according to RHB Research Institute, will bring Hartalega's installed capacity up to about 14.7 billion units per annum by end 2014, close to its target of 15 billion pieces by FY15F.

The complex, to be built over the next six years, will comprise six manufacturing plants and 72 production lines.

"At the end of the sixth year, in 2020, the capacity is expected to be 42 billion pieces per annum," said, Kuan Mun Keng, a director at Hartalega.

RHB Research Institute said that Hartalega's superior margins will help it weather through the competitive environment and that any concern about overcapacity is exaggerated.

"We upgrade the company to buy, with a new FV of MYR7.70 (from MYR6.95), representing a 10.3 percent upside," says its analyst Jerry Lee.


Source: Dow Jones Newswires
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Re: Hartalega

Postby winston » Fri Dec 12, 2014 5:22 am

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More upside for Hartalega as nitrile rubber costs fall

KUALA LUMPUR: Maybank Investment Bank Research sees more upside for nitrile glove maker Hartalega due to the fall in the prices of the key raw material and commodity prices.

It said on Thursday the price of key raw material nitrile-butadiene rubber (NBR) has fallen 9% in two months. NBR is an oil-resistant synthetic rubber produced from a copolymer of acrylonitrile and butadiene.

“This is in line with the fall in natural rubber latex (-11% in two months), owing to weaker demand and high inventory. The US$/ringgit is rising at a rapid rate (+10% in four months) and broader indicators (low crude oil price, foreign fund outflows) point to sustained weakness in the US$/ringgit into 2015,” it said.

Maybank Research said in view of the falling commodity prices, it sees further downside risk to the price of NBR, which will cushion Hartalega’s margin, in the event that nitrile glove competition heats up in 2015.

In any case, it had already factored in margin contraction from increased competition.

Hartalega is also a net beneficiary of a strong US$ in the long term as its US$-denominated sales receipts outweigh its US$-denominated costs.

“However, in the short term, the company may see some forex loss as it has locked in its US$/ringgit at lower rates. This, couple with start-up costs at its new plants, could cap its earnings in the next two quarters.

“We are turning positive on Hartalega as we look forward to its strong FY3/16-17 EPS growth of 31% and 18% respectively,” it said.

The appeal of the stock is in its:
(i) defensive earnings profile (resilient global demand growth); and
(ii) ability to gain market share while ensuring bottomline growth due to its cost effectiveness.

Maybank Research said its earnings forecasts are unchanged but its target price was raise to RM8.50 (from RM7) as it pegs Hartalega to its +one standard deviation mean price-to-earnings ratio of 21 times 2016 (from 19 times), as it regains its superior earnings growth.

“The healthcare sector’s PER average is currently a higher 29 times. Hartalega is our Top Pick in the sector for the next 12 months,” it said.

Source: The Star
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Re: Hartalega

Postby winston » Wed Feb 17, 2016 5:19 am

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Hartalega’s Q3 net profit jumps 47%

BY TEE LIN SAY

KUALA LUMPUR: Hartalega Holdings Bhd, the world’s largest producer of nitrile gloves, posted a 46.99% jump in net profit to RM72.79mil for the third quarter ended Dec 31, 2015 on a combination of a strengthening US dollar, expansion in capacity and an increase in demand.

Its revenue increased 38.97% to RM398.02mil for the period, while earnings per share (EPS) grew to 4.44 sen from 3.2 sen.

On the back of these results, the company has declared a second interim dividend of two sen per share for its financial year ending March 31, 2016 (FY16). The entitlement date is on March 10, 2016 and payable on March 30, 2016. The stock closed unchanged at RM4.98.

In a filing with Bursa Malaysia, Hartalega said the better profits were due to new production lines from its next-generation integrated glove manufacturing complex (NGC) plants. Nonetheless, the operating profit margin fell from 24.9% to 22.7% due to a reduction in the average selling price, arising from lower nitrile material prices and more competitive sales pricing.

On a nine-month basis, net profit increased 26.57% to RM195.88mil on the back of a 30.57% jump in revenue to RM1.1bil. EPS increased to 11.95 sen from 9.99 sen. Thus, on a nine-month basis, the company has given out a total of six sen in dividends as compared to five sen previously.

The company’s net assets per share was at 89.37 sen as of the period.

In a statement, Hartalega’s managing director Kuan Mun Leong said: “Our long-term expansion strategy via the NGC is clearly bearing fruit, as demonstrated by our strong performance over the last few quarters. We have seen good earnings growth with increased contributions arising from the new production lines of the NGC.

“Despite external pressures, including more competitive sales pricing, we are confident that we will continue to deliver sustained earnings, particularly as additional production lines come on-stream,

“Furthermore, with the construction of Plant 3 and 4 of the NGC well underway, we are set to see even further capacity growth in the year ahead, which will enable us to cater to the strong global demand for nitrile gloves.”

The board of Hartalega is optimistic that the company will achieve the internal target growth for FY16.

The company has been manufacturing premium latex gloves since 1988 and currently operates from its plants in Bestari Jaya and Sepang, Selangor.

The company has a current available capacity of producing over 18 billion gloves annually. Hartalega exports to over 40 countries across five continents.

Source: The Star
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Re: Hartalega

Postby winston » Mon Jul 25, 2016 6:28 pm

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Margins at great risk

We project a somber 1QFY17 performance as earnings growth was most likely hindered by higher gestation costs from NGC and pricing pressure.

With most of the sector’s capacity expansion in the NBR segment, Hartalega’s margins are at risk given the group’s higher exposure (90% NBR: 10% NR).

Hence, the group will be focusing on driving sales volume to offset margin declines.

The group will also be slowing down its expansion plans in view of competition.

Downgrade to Reduce, with an unchanged target price of RM4.00.

Source: CIMB

https://brokingrfs.cimb.com/3_3AvG8r2aC ... HUdPg2.pdf
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