Hartalega likely to announce interim dividend, says Affin IB Research

Affin IB Research has maintained its Add rating on Hartalega Holdings Bhd at RM7.39 with a target price of RM7.75 and said the company would likely announce an interim dividend this time around, estimated to be a single tier interim dividend of around 3.5 sen per share (DPS) when it announces its 1HFY03/14 results later today.

In a note Tuesday, the research house said that for FY03/14, it holds out for a net DPS forecast of 14.5 sen, based on a 45% dividend payout ratio.

Affin IB Research said riding on the resilient demand spurred by rising healthcare reforms globally and lower selling prices in tandem with the lower raw material costs, it expects Hartalega to continue to register a stellar demand growth in 1HFY03/14.

“We estimate Hartalega’s volume sales to grow by circa 20% year-on-year (y-o-y) to 5 billion pieces.

“Notwithstanding the robust growth in volume sales, we believe Hartalega’s topline revenue growth will be mitigated by the lower selling prices (ASPs) brought by stiffer competition, growing at 10% y-o-y to circa RM560 million,” it said.

The research house said it also expects Hartalega to incur a foreign exchange loss of around RM8 million, as the group had in 1QFY03/14 locked-in a forward six-month contract at RM3.12/US$.

“Stripping off the FX loss and assuming the continued moderation in operating expenses (low raw material costs and improved operating efficiencies), we expect Hartalega to record a robust 20% y-o-y growth in core net profit to RM136 million.

“All in, we believe Hartalega’s 1HFY03/14 results will come in within expectation,” it said.

Hartalega 2Q net profit rises 8.2% to RM63.3m, declares interim dividend 3.5 sen

Hartalega Holdings Bhd net profit for the second quarter ended Sept 30, 2013 rose 8.2% to RM63.3 million from RM58.5 million a year earlier, due mainly to an easing in raw material prices of nitrile and natural latex.

In a statement Tuesday, Hartalega said revenue for the quarter rose 10.2% to RM280.9 million.

The glovemaker declared a first interim dividend of 3.5 sen per share.

For the six months ended Sept 30, Hartalega’s net profit rose 12.7% to RM126/3 million from RM112 million a year earlier, on the back of a 11.2% rise in revenue to RM558.9 million compared with RM502.6 million the prior year.

Earnings per share (EPS) for the Group’s first six months was 17.05 sen compared with 15.31 sen for the same period in the previous financial year. The Group’s net assets per share was 117.91 sen as at 30 September 2013.

Hartalega said the improved operational efficiency of the new production lines contributed to the increase in operating profit margin as well.

Hartalega managing director Kuan Mun Leong said the first of the current financial year had been positive, and the company was confident that it would be able to maintain its performance.

“Our continuous improvements to operational efficiency and production capacity coupled with the steady rise in demand for nitrile gloves certainly bode well for the group, as we are well-positioned to meet this demand growth.”

“In particular, our Next Generation Integrated Glove Manufacturing Complex (NGC) will set the foundation for our sustainable long-term growth. The NGC will not only see our production capacity increasing substantially,

we will also see productivity gains as a result of economies of scale as we undertake initiatives to develop our in-house technological competencies and expand our human capital in the coming years,” said Kuan.

First interim dividend of 3.5 sen per share single tier for the financial year ending 31 March 2014

EX-date 27/11/2013
Entitlement date 29/11/2013
Payment date 19/12/2013