Harta: Earnings Dipped

Result Update

For QE31/3/2019, Harta's net profit dropped 24% q-o-q or 22% y-o-y to RM91 million while revenue was mix- down 5% q-o-q but up 11% y-o-y to RM684 million. Revenue dropped q-o-q mainly due to lower average selling price for the quarter. Profit before tax for the quarter eased by RM36.3 million or 24% mainly due to sharp strengthening of the ringgit in a short time frame as the Group was unable to pass on the corresponding cost increase to customers in a timely manner. Other factors such as lower average selling price, higher upkeep of office equipment, plant & machinery cost and labor also contributed to lower profits for the quarter.


 Table: Harta's last 8 quarterly results


Graph: Harta's last 53 quarterly results

Financial Position

As at 31/3/2019, Harta's financial position is deemed healthy with current ratio at 1.85x and gearing ratio at 0.32x.

Valuation

Harta (closed at RM5.05 yesterday) is trading at a trailing PER of 37 times (based on last 4 quarters' EPS of 13.74 sen). At this PER, Harta is deemed fully valued.

Technical Outlook

Harta has been declining in a downtrend line (RR) with resistance at RM.10. Until Harta had surpassed this downtrend line, its share price will remain weak. However, the rising low may provide support (SS) at RM4.70.


Chart: Harta's daily chart as at May 7, 2019 (Source: Malaysiastock.biz)

Conclusion

Despite weaker result & demanding valuation, Harta is considered a good stock for long-term investment based on capable management team and strong leadership in the glove sector.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.