Harta may have a bullish breakout

Harta broke above its recent high of RM5.10 this morning. See Chart 1. Harta-WA has similarly broken above its downtrend line at RM1.17. See Chart 2.


Chart 1: Harta's daily chart as at Apr 5, 2012_10.30am (Source: Quickcharts)


Chart 1: Harta-WA's daily chart as at Apr 5, 2012_12.30pm (Source: Quickcharts)

Harta is the most profitable of the rubber glove manufacturers in Malaysia. It has a pre-tax profit margin of 28.8% while the other major manufacturers (such as Topglov, Supermx & Kossan) only enjoy pre-tax profit margin of 11-13%. One of the main reasons is that it produces nitrile gloves which command a better margin. Because of its better profit margin and a perception of superior manufacturing prowess, Harta can command a higher PE of 16.9 times as compared to the other manufacturers.


Table: Rubber glove manufacturers' Profit margin, EPS & PE

Harta, which manufactures mostly nitrile gloves, may have an advantage in term of its raw material cost. The other producers of rubber gloves are now experiencing steadily rising latex price while nitrile input has risen less. See the chart for rubber prices & WTIC below.


Chart 3: Rubber price chart as at Apr 4, 2013 (Source: Rubbernet.com)


Chart 4: WTIC's weekly price chart as at Apr 4, 2013 (Source: Stockcharts)

Based on technical breakout, Harta could be a good trading BUY.

Note:
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 & Harta-WA.