ANALYSTS are mixed on Hartalega Holdings Bhd following the announcement of the group’s financial results for the third quarter ended Dec 31, 2019.
The glove maker saw three analysts maintaining their Neutral calls, from JF Apex Securities, Affin Hwang Capital and Inter-Pacific Securities, with all three raising their target prices to RM6.20 from RM4.60, RM6.40 from RM5.20, and RM6.21 from RM4.92 respectively.
RHB Research maintained a Buy call with a higher target price of RM7.55 from RM5.95, while TA Securities maintained a Sell call with a raised target price of RM5.71 from RM4.42.
Call changes also came from MIDF Research and AmInvestment Bank, with the research houses downgrading Hartalega to Sell and Underweight from Neutral and Hold respectively, with MIDF maintaining its target price of RM4.90 and AmInvestment raised its fair value to RM5.38.
Hartalega stands to be a beneficiary of the current coronavirus outbreak, with stronger demand from the North American market resulting from both the outbreak as well as a new tariff imposed on medical gloves imported from China into the United States, according Affin Hwang.
“Our recent checks suggest that there is an uptick in demand for rubber gloves due to the current coronavirus outbreak. Hartalega’s management has also indicated that it is likely to continue to operate at above 90% utilisation rate and will also be prioritising some orders.
“We believe that since Hartalega is already operating beyond its optimal utilisation levels, Hartalega would have the flexibility to raise its selling prices to enhance its margins,” said the research house.
RHB and Inter-Pacific are positive as well on the surge in demand for rubber gloves. However, AmInvestment and MIDF are of the opinion that the rally is short term in nature.
“We believe the group will benefit from the recent coronavirus outbreak as we expect the industry-wide capacity expansion will be met with increased glove demand.
“However, as customers have started to stock up, we believe that the demand for gloves will immediately taper after the outbreak has been contained,” said AmInvestment Bank.
MIDF said: “We do not believe that the current valuation is justified given the recent subdued performance. In addition, we do not believe that the nCoV19 outbreak will significantly lift the group’s future earnings.
“Hence, investors could take profit from the recent share price spike which we believe is not fully backed by fundamentals.”
At 12.30pm, Hartalega’s shares were last done at RM6.12, up 12 sen, with 5.69 mil shares changing hands. – Feb 12, 2020
