Harta Q4 2019

• Gross profit margin reduced from 25.56% in 2018 to 20.23% in 2019 due to sharp strengthening of the ringgit in a short time frame as the Group was unable to pass on the corresponding cost increase to customers in a timely manner. (This actually means that if given sufficient time frame, Harta has the ability to pass the additional cost to its customer)
• Net profit merely increased 3.7% in 2019 as there is an other operating income of  RM 46 million in 2018 oppose to other operating expenses of RM 10 million in 2018 (if exclude the other operating income/expenses, the net profit would have an increment of 18% in 2019). 

• Although borrowings increased slightly however its gearing ratio remain at a very healthy level of 9% (increased from 8% in 2018).
• Total assets increased by 13.66% however total liabilities increased by 15.19%. 

• Harta has invested approximately RM 2 billion on its expansion on NGC up-to-date (there is another half a billion to invest to fully complete its NGC expansion plan which is expect to finish in the coming 2 years)
• The cash flow from operating generated is extremely strong at RM 625 million (Harta is very capable to complete its remaining expansion without further borrowings and have the ability to become a cash rich company once it finish its expansion plan)

Futures Prospect

Comments

Although news has been saying that there might be an oversupply of glove moving forward and the management also highlight the issue in its future prospect and also believe that the new capacity will be taken up slowly (this is evidence by the strong revenue growth in 2019). Management also come out with a solution to solve the issue of gross profit margin under pressure. Overall, the management is positive with its own long term prospect and if there is a drop in share price due to this, it is definitely a chance to accumulate. At PE of 32, Harta is worth RM 4.36.