Monday, February 27, 2012

Harta- generous reward for its shareholders

Results Update

Harta has just announced its results for QE31/12/2011. Its net profit increased by 10% q-o-q or 3% y-o-y to RM50.7 million while its turnover rose 5% q-o-q or 29% y-o-y to RM241 million. The improved bottom-line was due to higher sales, which in turn was contributed by capacity expansion. While Harta's profit before tax & profit after tax margin had declined compared to the corresponding quarter last year, they have improved q-o-q from 25.9% to 26.4% & from 20.1% to 21.0%, respectively.

Table: Harta's last 8 quarterly results

Chart 1: Harta's last 17 quarterly results

Chart 2: Harta's profit margin for last 17 quarterly results

Other Development

Harta has announced a Bonus Issue of 1-for1 as well as a free warrant issue of 1-for-5. This generous capital exercise might explain the sharp rally in the share price over the past 6 weeks.


Harta (closed at RM8.40 last Friday) is now trading at a PE 15 times (based on last 4 quarters' EPS of 56 sen). At this PE multiple, Harta is dalmost fully valued.

Technical Outlook

Harta broke above its strong horizontal resistance at RM5.85 in mid-January. While the share price may rally towards the ex-date of the proposed bonus issue of shares & warrants, the upside would probably be capped at RM9.00.

Chart 3; Harta's weekly chart as at Feb 24, 2012 (Source: quickcharts)


Based on satisfactory financial performance, strong management and fair valuation, Harta is a good stock for long-term investment. However, the stock's upside is limited for the near term after it had rallied about 40% in the past six weeks. As such, I would rate it a HOLD for now.

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