Hartalega; Buy; RM6.30
Price Target: RM6.60; HART MK

Hartalega has signed a conditional sale and purchase agreement with Kumpulan Tanjung Balai Sdn Bhd to acquire approximately 112 acres of land in Sepang for a total purchase consideration of RM96.9mil. The acquisition will be funded by internally generated funds and bank borrowings, and is expected to be completed in the next three months.

The land is acquired for the construction of Hartalega’s Next Generation Integrated Glove Manufacturing Complex (NGC). The NGC project plans to add 28 billion pieces capacity over the next eight years. The entire project is expected to cost RM1.5-2.0bn (including the RM100m land cost) and will lift total production capacity to 42 billion pieces upon completion, targeted in 2022. Hartalega remains in net cash position (RM170m) as of Mar-13. We have a BUY rating on Hartalega with a TP of RM6.60 (based on P/E of 18x on CY14 fully diluted EPS).

Source: HwangDBS Research - 13 Jun 2013