Tuesday, May 03, 2016

Harta: Earnings Disappoints

Result Update

For QE31/3/2016, Harta's net profit dropped by 15% q-o-q but rose by 12% y-o-y to RM62 million while revenue was relatively unchanged q-o-q but rose 31% y-o-y to RM400 million. Revenue rose q-o-q  basically due to increase in demand but was offset by the weakening of the USD & more competitive sales pricing. Despite recognizing net forex gain of RM19.482 million (compared to a gain of RM707k in QE31/12/2015), PBT dropped q-o-q due to lower operating profit margin of 13.1% (compared to 22.7% in QE31/12/2015) as a result of lower selling prices, increase in natural gas cost, maintenance cost, depreciation & other overheads.

 Table: Harta's last 8 quarterly results

Chart 1: Harta's last 34 quarterly results


Harta (closed at RM4.14 today) is trading at a trailing PER of 26 times (based on last 4 quarters' EPS of 15.72 sen). Despite a 17%-drop from RM4.98 since mid-February, Harta is still trading at fairly demanding multiple.

Technical Outlook

Harta tested its accelerated uptrend line, S1-S1 support at RM4.00. If this uptrend line holds, the stock will attempt to build a base here. Failure to do so will send the stock to its long-term uptrend line, SS support at RM3.20.

Chart 2: Harta's monthly chart as at May 3, 2016 (Source: Share Investor)


Based on strong leadership in the rubber glove sector & capable management team, Harta is considered a good stock for long-term investment. However, the stock is over-priced due to high expectation of rapid growth which has yet to materialize. Since its recent sharp drop, the rating of SELL INTO STRENGTH is now revised to HOLD.

In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Harta.

1 comment:

JDoyou said...

Thanks Alex for this insightful commentary. I was deciding to buy, and in the process of doing some research, landed on your blog.