CIMB Research keeps Outperform on Hartalega

Written by Joseph Chin
Thursday, 05 November 2009 11:09

KUALA LUMPUR: CIMB Equities Research is keeping an outperform outlook on Hartalega as it expects the glove maker to post strong earnings, in line with other glove makers like Top Glove and Supermax.

Hartalega's share price rose seven sen to RM5.32 at 11am with 32,500 shares done on Thursday, Nov 5.

CIMB Research said Hartalega was scheduled to release its 2QFY3/10 results on Nov 10. If the recent results posted by other glove players such as Top Glove (Outperform), Supermax (Outperform) and Latexx Partners (Outperform) are anything to go by, there is a high chance of similarly strong results from Hartalega.

"Annualised 1H10 earnings are likely to exceed our full-year estimate of RM108.1m by about 10%, largely because of stronger-than-expected sales, especially from the nitrile segment. Pending the release of the results, we make no change to our earnings forecasts," it said.

It rolled forward its target price to end-10 while retaining its valuation basis of 13.5 times price-to-earnings, based on an unchanged 10% discount to Top Glove's 15 times target PE.

"This lifts our target price from RM7.32 to RM9.62. In view of the favourable outlook for the company, we maintain our Outperform call. Potential re-rating catalysts include its improving quarterly earnings, coming in from higher demand and ongoing capacity expansion," it said.