Kenanga says positives already priced in for Hartalega

KUALA LUMPUR: Kenanga Research maintained its underperform rating on Hartalega Holdings with a target price of RM5 as all the positives have already been priced in.

It said the glove manufacturer's share price has run up by over 100% over the last 12 months.

On its recent earnings results, the research house said FY18 profit after tax, amortisation and minority interest of RM439.4mil came in within its expectations.

On year, revenue rose 32% due to higher sales volume, underpinned by new capacity from NGC Plant 4.

Profit before tax rose 51% as margin expanded 2.8ppt to 21.9% in FY18 due an increase in sales volume and improvement in operation efficiency on economies of scale from higher capacity.

"We expect contributions from Plant 5 to drive FY19 earnings growth. Once completed, Plant 5 is expected to boost additional capacity by 16% to 33.1b pieces per annum. 

"The group targets to launch its antimicrobial gloves in Europe by end May 2018 and is working on securing Federal Drug Administration (FDA) approval to enter the US market. All in, plant 5,6 and 7 will add a total capacity of 12.1b pieces raising installed capacity by 43% to 40.6b pieces per annum."