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Wednesday, May 8, 2019

RHB maintains buy on Hartalega, TP at RM5.77

Wednesday, 8 May 20198:48 AM MYT

KUALA LUMPUR: RHB research has maintained its buy call on Hartalega Holdings Bhd
following the release of expectedly weak 4QFY19 earnings results.

It remained its top pick in the sector with a target price of RM5.77.

"Keep BUY on Hartalega as it is a proxy to the rising health awareness theme in emerging markets. We expect glove demand to increase 8-10% annually (exceeding both world and Malaysia’s GDP growth)," it said in a note.

On Hartalega's recent earnings announcement, RHB said its FY19 net profit of RM456mil, which was up 4% year-on-year, was in line with its expectations although it came in below consensus estimates.

"4QFY19 net income declined 24% QoQ as revenue was down 5%.

"This was caused by the sharp strengthening of the MYR over a short period of time, and the company was not able to pass on the higher cost to consumers in a timely manner," IT said.

However, RHB believes Hartalega's share price has already priced in the weak quarter.

According to the research house, the glovemaker has experienced a 30% drop in share price from its peak of RM7.20 on Aug 28, 2018, and its forward P/E has declined by 17x to 30x forward P/E.

This compares to the previous earnings downcycle in 2016, it said, suggesting that the current downtrend is likely to have ended.


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