Harta: Earnings rose higher sales volume & stronger USD

Result Update

For QE31/3/2015, Harta's net profit rose 11% q-o-q or 12% y-o-y to RM55 million while revenue gained 7% q-o-q or 9% y-o-y to RM305 million. Revenue increased q-o-q due to the strengthening of the USD and increase on sales volume. Bottom-line improved due to lower operating profit margin - dropped from 24.9% to 22.2% - basically due to increase in maintenance and packaging material costs.


Table: Harta's last 8 quarterly results

From Chart 1 below, we can see that the profit margin has been sliding since 2010. Revenue has finally begun to rise again after a pause of 5 quarters. The increased revenue was able to arrest the drop in profit margin and this stopped the slide in the bottom-line.


Chart 1: Harta's last 30 quarterly results

Valuation

Harta (closed at RM8.22 yesterday) is trading at a PE of 30 times (based on last 4 quarters' EPS of 27.27 sen). At this PE multiple, Harta is deemed over-valued.

Technical Outlook

Harta is in a long-term uptrend over the past 6 years. It may have made a temporary top at RM8.50 and could correct back to find support at the psychological RM8.00 mark or the horizontal support at RM7.50 (which coincides with the 10-month SMA line).


Chart 2: Harta's daily chart as at May 5, 2015 (Source: Share Investor)

Conclusion

Based on lack of growth in its earnings, demanding valuation & mildly negative technical outlook, I would maintain my rating for Harta as a SELL INTO STRENGTH.

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.