Hartalega

Results within expectations

The glove-maker posted 9M10 net profit of RM97m, up 82% yoy and within market estimates. Key takeaways from the results: (1) Revenue increased 28% yoy on higher demand resulting from the recurrent flu outbreak. (2) Operating margins improved to 29.6% in 9M10 compared to 18.0% in 9M09 on improved production efficiency and lower raw material prices. Natural latex prices declined 18% yoy to RM4.62/kg during the period. (3) Net cash balance has turned positive to RM43.4m in 9M10 from -RM19.5m in 9M09. (4) A second interim dividend of 5sen/share has been declared, bringing the total dividend declared for FY10 to 10sen/share.

Hartalega trades at FY11E P/E of 11.8x and P/B of 3.6x, versus Top Glove’s P/E 12.5x and P/B 2.9x, and Supermax’s P/E 8.6x and P/B 1.8x.