Harta: Johnny Come Lately!

Result Update

For QE30/9/2020, Harta's net profit rose 148% q-o-q or 425% y-o-y to RM545 million while revenue rose 46% q-o-q or 90% y-o-y to RM1.346 billion. The higher sales revenue was attributed to higher sales volume and increase in average selling price for the quarter. Profit before tax for the quarter increased by RM 410.1 million or 150.3% y-o-y to RM683.0 million due to increase in sales revenue and better production efficiency.

 
 Table: Harta's last 8 quarterly results


Graph: Harta's last 52 quarterly results

Valuation

Harta (closed at RM18.28 yesterday) is trading at a trailing PER of 62 times (based on last 4 quarters' EPS of 29.47 sen). If we annualized the last 2 quarterly EPS of 22.44 sen to arrive at a full-year EPS of  44.88 sen, then its PER will be lowered to 40.7 times. 

Like in the case of Supermx, we are being too generous in using the annualized EPS of 44.88 sen to compute the PER for Harta as we looked ahead to the normalization of profit due to increased supply of gloves (as a result of increased capacity) as well as lower demand if Covid-19 pandemic were to subside. This will be a tough judgement call for analysts and investors.

Financial Position

As at 30/9/2020, Harta's financial position is deemed healthy with current ratio at 2.63x and gearing ratio at 0.44x.

Corporate Exercise Missing!

Unlike Kossan, Supermx and Topglov, Harta has yet to announce its bonus issue. The timing of that announcement will have a direct impact on the price movement in the near term. I expect a 1-for-1 bonus issue from Harta to be proposed in the next 2-3 months.

Technical Outlook

Harta share price has recently broken its short term uptrend line, S2-S2. The technical outlook for Harta will depend on whether it can surpass the intermediate downtrend line, RR at RM19.00. Until that happens, the near term outlook will likely be a sideways movement. 


Chart 1: Harta's daily chart as atOct 27, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on improved financial performance, satisfactory financial position and reasonable valuation, I revise Harta's rating to a HOLD.

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.

Supermx: It Gets Better!

 Result Update

For QE30/9/2020, Supermx's net profit rose nearly 100% q-o-q or more than 30 folds y-o-y to RM790 million while revenue rose 46% q-o-q or 266% y-o-y to RM1.352 billion. In the notes to the Financial Statement, the company explained its spectacular financial performance in these words:

"Supermax has again recorded a new record quarterly financial performance, achieving another historical high performance for the 2nd consecutive quarter. Revenue increased to RM1.352 billion from RM369.9 million from the previous year corresponding quarter. This increase translates to a 265.6% or RM982.6 million increase compared to the corresponding quarter a year ago. Profitability also increased sharply with EBITDA, PBT and PAT margins at its highest ever levels of 78.8%, 77.6% and 60.1% respectively. Comparing to the previous year corresponding quarter, the EBITDA, PBT & PAT has increased by 492.5%, 781.8% and 797.0% respectively."

Table : Supermx's last 8 quarters' P&L

Graph: Supermx's last 56 quarters' P&L

Valuation

Supermx (closed at RM9.78 yesterday) is now trading at a PER of 19.7x (based on last 4 quarters' adjusted EPS of 49.74 sen). If we annualized the last 2 quarterly EPS of 46 sen to arrive at a full-year EPS of  92 sen, then its PER will be lowered to 10.6 times. However, I believe to compute PER based on the annualized EPS of 92 sen may be too generous if we looked ahead to the normalization of profit due to increased supply of gloves (as a result of increased capacity) as well as lower demand if Covid-19 pandemic were to subside. This will be a tough judgement call for analysts and investors.

Technical Outlook

Supermx share price is well-supported by the intermediate uptrend line, SS at RM8.80 while the intermediate downtrend line, RR will cap its further upside at RM10.80. Given the strong earnings numbers, I think we may soon see a test of the intermediate downtrend line.

Chart: Supermx's daily chart as at Oct 28, 2020 (Source: Malaysiastock.biz)

Conclusion

Based on excellent financial performance, fairly attractive valuation and still positive technical outlook, Supermx deserved to be upgraded to a BUY.

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.

Glove Stocks: Is That A Temporary Top?

Yesterday, glove stocks dropped sharply. The sell-off came after a 4-day lull in upward price movement for most of the big 4 glove stocks (except for Harta). The price drop yesterday broke the uptrend line in the current rally for most of the glove stocks, which began on 11 September. Unless the share prices can recover above the violated uptrend lines, the glove stocks could well have made a temporary top. 

Chart 1: Harta's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

Chart 2: Kossan's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

Chart 3: Supermx's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

Chart 4: Topglov's daily chart as at Oct 21, 2020 (Source: Malaysiastock.biz)

With increasing news flow of the imminent arrival of vaccines, investors would have to weigh the return from holding onto their glove stocks against the risks that the rally may have peaked. In times like this, investors should consider taking some cash off the table. Redeploying the proceed to some deeply sold-down stocks, like AIRPORT or GENTING, may be a good diversification strategy to benefit from the arrival of the vaccines and the normalization of life as we know. Good luck! 

HTPADU: A bullish breakout

Yesterday, HTPADU broke above the line connecting its recent peaks at RM1.20. The bullish breakout was not accompanied by a huge volume. If the buying support can sustain, the breakout may lead to a new upleg for the stock. Its immediate resistance is its July 2019 high of RM1.45.

The bullish breakout for HTPADU could be due to new development in the award of the immigration job by the government. for more, go here.

 

Chart: HTPADU's daily chart as at Oct 7, 2020 (Source: Malaysiastock.Biz)

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