Stock Name: HARTA
Company Name: HARTALEGA HOLDINGS BHD
Research House: OSK

KUALA LUMPUR: OSK Research says Hartalega's 1QFY11 results ended June 30 were within expectations.

It said on Wednesday, Aug 11 that overall, although revenue was higher on-quarter, net profit fell slightly as rubber glove demand normalised, which affected the company's ability to pass on 100% of its costs in a timely manner.

'Also, we understand that its performance was squeezed by the strengthening ringgit against the US dollar (USD), recognition of share-based payment expenses and the negative effects of adopting FRS 139. Nevertheless, we continue to like the company's market leadership in the nitrile gloves market. Maintain Buy,' it said.

OSK Research said its target price for Hartalega is RM11.89, based on the existing PER of 14x FY12 EPS.

The investment risks include: 1) slower-than-expected examination rubber glove demand from the US and Europe markets; 2) protracted weakening of the dollar against RM since the bulk of its sales is from exports, and 3) high reliance on 2 major customers, Medline and Microflex, which together account for more than 50% of total sales.