Monday, 9 April 2012

CIMB Research maintains Outperform call on Hartalega

KUALA LUMPUR (April 9): CIMB Research has maintained its Outperform rating on Hartelega Holdings Bhd at RM7.91 with a target price of RM9.98 and said the company’s 28.4 billion-pieces-of-gloves expansion by FY22 was a strong signal that it remains focused on growth.

The research house ina note April said the project enables Hartalega to defend its dominant position and add market share.

“We believe backing by the government mitigates risks and raises the probability of success,” it said.

Also, the Kuan family remains invested in the project as they could contribute RM172 million of equity or 41.7% of the external funding via warrant conversion.

“Maintain Outperform and target, still based on 13.05x forward P/E, in line with Top Glove’s 2-year historical average,” said CIMB Research.

The research house said investors should accumulate the shares, adding that Hartalega had overtaken Top Glove as the world’s most valuable glovemaker.

“Soon it may exceed Top Glove’s capacity as well. Yields remain tops in the sector. Re-rating catalysts would be i) strong 4Q results, ii) acquisition of the 100-acre site, and iii) securing of gas supply,” it said.

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