Posted by jolynce > 2022-02-09 19:33 | Report Abuse

@bang_miskin you know I know.
By the way, months before budget 2021, one ex minister from the opposition bloc urged the govt to impose windfall tax on tauke2 for their extraordinary profits. I noticed he likes to use the word "tauke" as if.. all of them are Chinese or so he's implying. So, next GE, who is the lesser evil? I have no clue. :P


Posted by bang_miskin > Feb 9, 2022 7:04 PM | Report Abuse

The timing of the tax is impeccable, right when they make the most profit. Coincidence? They say it affects all profitable companies, sure buddy, sure....

Can't wait for the next GE to get them out.

Posted by bang_miskin > 2022-02-09 19:47 | Report Abuse

@jolynce. Yeah I get what you mean.
I don't want to stray into politics, but if the incumbent government underperforms, I will vote for the opposition, just to punish them. It's very childish, but they don't get a free pass for the screw-ups in 2021. Usually I am very apathetic towards the GE, because in this country my vote won't matter. But this time, I just to make a statement.

Posted by jolynce > 2022-02-09 19:54 | Report Abuse

Not childish. Understandable :)

Posted by bang_miskin > Feb 9, 2022 7:42 PM | Report Abuse

@jolynce Yeah I get what you mean.
I don't want to stray into politics, but if the incumbent government performs badly, I will vote the opposition, just to punish them. It's very childish, but they don't get a free pass for the screw-ups in 2021

Posted by observatory > 2022-02-09 19:59 | Report Abuse

@jolynce,
Should avoid using current quarter capacity plan to project future demand. Read the past few quarter reports in succession, you will find that the management has scaled back/ pushed out their expansion plan. Not just for Harta, but also Top Glove.

Caution is actually good. But we also have to see how foreign rivals react. Last year Sri Trang told The Edge it wanted to expand to 80b by 2024, and 100b by 2026. Intco Medical has a near term plan for 120b capacity. I'm not sure their latest position. Given by and large gloves are commodity products, if rivals continue to expand by sacrificing margin, Harta cannot afford not to respond. Otherwise it will lose market share.

Refer to Harta's past annual reports. Long term ASP trend is down (this is like the principle of economics; also applies of other manufactured goods). It was about USD40 per 1k in 2008, about USD30 in 2015, and approaching USD20 before the pandemic. The high ASP during Covid 19 is an aberration.

What is important is the continuous uplift in efficiency. Pre-pandemic Harta has the highest net margin among its peers. But this higher efficiency has also been reflected in Harta's higher share price multiples.

Posted by observatory > 2022-02-09 20:08 | Report Abuse

On the subject of prosperity tax. I actually believe Malaysian glove producers should count themselves lucky.

Given the poor government's finance position (though we can always argue about the corruption and waste, and the 1.7 million civil servant, a "world class standard" of 1 to 18 (versus around 1 to 100 for many developed countries), taxing the corporate is unavoidable.

But Jolynce is right. Politicians from both sides of the divide, and in fact former CIMB's head Nazir Razak, the economist Jomo, all advocated for windfall tax on glove companies. This is not helped by a certain glove industry captain who lost his cool and bragged about being the largest company in Malaysia, and soon to be Fortune 500!

All the talks among glove investors and media in later 2020 bragging about the sky rocketing share price, and lavish share buyback, and later the poor living condition of foreign workers, amid the severe pandemic suffered by the general population, has certainly painted a very negative image on this industry. So why not re-distribute the windfall from the greedy (companies and shareholders) to help the needy (Malaysians in general)? The glove industry receive little sympathy from the public.

Of course a windfall tax could be detrimental to investors' confidence on further investment in Malaysia. To the credit of Finance Minister Tengku Zafrul, he went for the one time prosperity tax on large profitable corporations instead of narrowly targeting the glove sector. As a results, many large corporations like banks, insurers, utilities, plantation companies are sharing the burden with glove producers. So glove companies should not complain (although this is scant consolation to glove shareholders who were late to the party)

Nevertheless the prosperity tax still contains some unfair elements. First the profit threshold of RM100m is set at company level. Listed holding companies with many subsidiaries, each with profit below RM100m, can escape this tax. Second the tax is based on fiscal year not financial year. Companies which make a lot more in fiscal year 2021 than calendar year 2022 will have to pay more.

Hartalega has been unlucky on both counts, for it has a simple corporate structure and early financial year that starts in April.

Posted by Hafid > 2022-02-09 20:08 | Report Abuse

Lucky than plantation which have the sales tax, levy tax and other tax

Posted by jolynce > 2022-02-09 20:09 | Report Abuse

@observatory Thank you again. The truth is, for those of us who are stuck in gloves, caution is something we have learnt the hard way. For me at least. :)

Posted by Hafid > 2022-02-09 20:09 | Report Abuse

BN Still win because the Chinese lost a lot for the PH and also PN.

Posted by observatory > 2022-02-09 20:10 | Report Abuse

Yes, plantation companies have been paying windfall tax for years. The Indonesian government also recently mandating their plantation companies to reserve 20% for local at low price.

Posted by bang_miskin > 2022-02-09 21:38 | Report Abuse

Yes I agree that while glove companies should not complain, it sets a bad precedent for investor's confidence. It is easy to say that it is a one-time tax, but what is stopping the government from imposing another one-time corporate tax in the near future? (Malaysia's corporate tax is already quite high, but that's a separate issue.)

I may be a minority here, but I am partial towards resuming the previous government's GST. Sure nobody like to pay extra tax, but to me a "fairer" kind of tax. One can always tailor the tax to exempt necessity goods (i.e. food) to ease tax burden on the poor. But I don't see that coming back anytime (if so it would be in a different name).

Anyway if poor sales was to be blamed on shipping disruption for this QR lower-than-expectation, we may see sales recover somewhat in the next QR when they resolved this issue. Still don't expect profit to be higher because of falling ASP.

Posted by Mini2021 > 2022-02-09 22:23 | Report Abuse

No need to talk much, Chicken price and eggs price going to increase, I heard Mahsing will farm Chicken this time......last round the start gloves factory now they will go venture into Chicken ....I hope Harta Boss can learn from Mahsing boss ....

Posted by observatory > 2022-02-09 22:32 | Report Abuse

GST (with suitable exemption) makes sense. This was one of the few thoughtful policies introduced by the then Najib's government. Of course Najib was also forced by circumstances, which were the deteriorating fiscal situation, collapsing oil price, and the big hole from 1MDB!

Unfortunately his GST implementation was poor. And the dissatisfaction was exploited by the opposition. In fact I suspect more people voted for PH for lower prices through GST abolishment, free toll and so on, all populist measures, rather than the more abstract issue of abuse of powers, corruptions or 1MDB scandal.

After all, GST is regressive. Although higher income families pay more GST due to higher consumption, as a proportion of income they pay relatively less. Besides they are mostly net savers. On the other hand, lower income families usually consume all they earn, and sometimes over. So they will only pay proportionately more tax if GST is introduced.

Given only about 1 in 6 Malaysian wage earners pay income tax, given a choice I bet the 5 non-income tax paying person would rather the sixth person, and corporations too, to continue paying the tax. And more if necessary. Politicians from every single party will pander to this majority group. Who care about the long term economic consequences or loss of competitiveness?

Many urgent reforms are needed in Malaysia. The other is to streamline the size of public sector workforce that I mentioned earlier. About half of the Malaysian government revenue collected are now spent on civil servant emolument and pension. And the spending continues to grow fast! This is a ticking time bomb. The government can tax the corporations and high income earners till they run away from this country and it will still not be enough to meet the growing appetite.

But who has the political courage to advocate for painful reform? Do you think they will get the votes? Expect complacency to continue until it develops into a crisis!

Posted by COVID 19 > 2022-02-09 22:54 | Report Abuse

手套售价趋低-繁荣税冲击-贺特佳末季恐蒙亏

Posted by bang_miskin > 2022-02-09 23:02 | Report Abuse

@observatory I thought it was a typo that only 1 in 6 Malaysian wage earners pay tax, then I checked it wasn't. That was depressing. Any reform towards increasing the tax base would be shot down. In that case, the GST consumption tax (with suitable exemption) would be a step in the right direction even if the tax is highly regressive and unpopular, it's an indirect way of expanding the tax base and sharing the tax burden.

Any reform toward the burgeoning civil servant pay and pension won't happen anytime soon. It represents a very important voting base. Even a strong ambitious leader would not touch that with a ten foot pole. Just have wait until it explode in their faces before you see any meaningful reform.

Posted by apple168 > 2022-02-10 06:09 | Report Abuse

https://www.sinchew.com.my/?p=3596932

Posted by StartOfTheBull > 2022-02-10 08:15 | Report Abuse

How low can it goes? RM4? RM3 or lower?

Posted by looiting > 2022-02-10 09:28 | Report Abuse

Still waiting for below RM5

Posted by YourQuirkyWays29 > 2022-02-10 09:30 | Report Abuse

Thanks for the reminder and great analysis @Observatory. I was totally in the impression that cukai makmur will be on FY2023 which consists of 9 months in CY2022. No wonder Harta's price got f over during that announcement, should've spent more time researching.

Posted by Anxious > 2022-02-10 10:31 | Report Abuse

Hopefully the worse is over and it stays above 5.

Posted by Mini2021 > 2022-02-10 12:28 | Report Abuse

Only boss able to maintain at RM5 ....... the operator is epf..... RM 100 million able to buy 20,000,000 units..... However EPF got 300,000,000 units shares to play .... The rule set by Bursa....... They are the boss, boss cant do anything ....

Posted by Mini2021 > 2022-02-10 12:31 | Report Abuse

When Epf selling at low, you dont think they loss money ....they earn huge from short selling...... they dont care the price keep going down as they can buy back later at lower.....they have 1 trillion cash to play v you......... However just look at US and Malaysia , US keep moving up the company , Malaysia government keep moving down the company ......if you ivest in US 10 years ago .... no one will loss money in stock

Posted by NatsukoMishima > 2022-02-10 14:04 |

Post removed.Why?

Posted by jolynce > 2022-02-10 14:39 | Report Abuse

Harta's dividend payout for the last 4 qtrs (including this one): 17.7+14.80+35.2+19.75=87.45sen

If your average cost is RM8 = DY 11%, av cost RM7 = DY 12% pa, av cost RM6 = DY 15%.

As long as Harta continues to pay out good dividend and make it worth my while being "stuck" here, I have no complaints, since this money would've gotten crappy interest if I had kept it in FD. When the opportunity arise, I will definitely buy more to lower my cost and increase my DY. Many people are making losses investing in other sectors but without this kind of attractive dividend to show for at the end of the day. All is not lost my fellow glovers.

Posted by jolynce > 2022-02-10 14:47 | Report Abuse

@kinuxian yes you're right. But for now, that is the dividend I've gotten during the period of time when I could've gotten a lot less had I kept the money in FD. You might say, "but you could've used the money to invest in other stocks." Then my reply is, people who invest in other stocks in other sectors are losing money too, esp in recent months when there's selldown in consumer and construction and tech. Could've should've.. hindsight is 20/20.

Posted by Kingbeast > 2022-02-10 14:49 | Report Abuse

U all really dreaming about gloves.

Posted by Mini2021 > 2022-02-10 14:49 | Report Abuse

kinuxian: when I started invest in Harta during 2016 and collecting dividend till today..... my profit is huge ....not including the share split + capital gain........ Be realistic ....dont away which for jackpot....

Posted by jolynce > 2022-02-10 14:55 | Report Abuse

@kinuxian obviously you can't expect double digit DY unless the business continues to make supernormal profits. As long as the dividend is higher (hopefully much higher) that FD rates, I'm happy. That's why we diversify, invest in growth stocks, and dividend stocks.

Posted by Mini2021 > 2022-02-10 14:59 | Report Abuse

when you invest Harta at Rm 1.80 during 2008, till today Harta price is around RM 70.....this not including the dividend RM 20k ..... so in total ....when you invest 1,000 units RM 1800, you will get RM 100,000 k till today ......this is not including the dividend reinvest ...if include the dividend reinvest ......mean RM 150k or more....... Be realistic ...investment need time..... not suitable for kid.

Posted by jolynce > 2022-02-10 15:15 | Report Abuse

@kinuxian likewise with regards to utilities, banking, plantation.. managed to take profit, no losses here but generally not happy with the meagre returns from these sectors LOL! Good luck!

Posted by NatsukoMishima > 2022-02-10 15:35 | Report Abuse

@Mini2021 when you invest Harta at Rm 1.80 during 2008, till today Harta price is around RM 70.....this not including the dividend RM 20k ..... so in total ....when you invest 1,000 units RM 1800, you will get RM 100,000 k till today ......this is not including the dividend reinvest ...if include the dividend reinvest ......mean RM 150k or more....... Be realistic ...investment need time..... not suitable for kid.
______________
Now everything has changed since China power challenging Malaysia gloves , be realistic ..malaysia glove company will continue decline their net profits until net loss !

Posted by observatory > 2022-02-10 15:36 | Report Abuse

While Harta share price looks under pressure in the near term, I'm skeptical of anyone's ability to predict 40% drop. Why not 20% or 60% drop. How are the predicted number derived?

China's competitions and coming quarterly loss are well known to the fund managers, whom collectively set the share price due to their large volume. These known facts are by and alrge already reflected in the current weak share price. What's important is whether they will turn out to be better or worse than average market expectation.

I agree short term investors should stay away. Even long term investors who have too much exposure may consider using each rebound to cut holding down to the level that they can sleep well. But for patient investors with little exposure, continuous share price decline for a well managed company means should start doing more homework.

The one time hit due to prosperity tax should not be a big concern now (unless more "one time" taxes are coming!) The assumed RM350-400m tax hit is about 6% of equity of about RM6 billion. Painful, but is expected since the budget announcement, and the hit is well defined.

The biggest uncertainty is about Harta's future margin due to ongoing competitions.

Harta's annual net profit for FY18, FY19 and FY20, i.e. the pre-Covid time, was over RM400m a year. Assuming the normalized net profit in FY23 is RM500m, the current market cap of RM17 billion implies a forward PE of 34 times.

The market accepted such high multiple in the past as the company was seen as a high growth stock. But if competitions proven to have erode this advantage (yet to be seen), then Harta's future margin could be much compressed, and a lower multiple is deserved.

Of course, the RM500m annual profit is just a wild guess without much evidence. One may adjust the number and multiple accordingly to get a different answer.

The key is to continue tracking the competition, especially foreign players' margin and expansion plan, and then project at what level Harta's margin will eventually settle.

Posted by observatory > 2022-02-10 15:39 | Report Abuse

@jolnce, the use of historical or even current dividend yield can be misleading when profit trend is unstable.

Harta's dividend policy is to distribute 60% net profit as dividend. When profit normalizes, future dividends will normalize too.

Using my above example (just a wild guess) of RM500m annual normalized profit. Divided by 3,428m share base, normalized earning per share is about 500/3,428 = RM0.146 or 14.6 sen. A 60% distribution yields about 8.8 sen per year. The projected dividend yield is less than 2% at current share price of RM5.

Of course, the normalized annual profit could be higher and hence higher DY. But this is still guesswork.

Posted by Mini2021 > 2022-02-10 15:56 | Report Abuse

Cant compare China gloves v Malaysia gloves .....Malaysia gloves is grade A gloves .....China is grade C......

Posted by jolynce > 2022-02-10 15:57 | Report Abuse

@observatory appreciate your explanation. For the past two qtrs including this one, Harta has been paying out more than 60% of its net profit, made possible by its strong cash reserves. When profit normalises, it is my hope that 1) DY is higher than FD and/or 2) Share price would've bottomed, and will trend upwards.

Posted by NatsukoMishima > 2022-02-10 16:02 | Report Abuse

High diyv will not sustain anymore , this qr is the last ! Next qr u will see single digit sens only!

Posted by NatsukoMishima > 2022-02-10 16:10 | Report Abuse

Next week can see rm 4.xx !

Posted by bang_miskin > 2022-02-10 16:13 | Report Abuse

@observatory is right, the biggest unknown here into the near future is increased competition. While it is easy to dismiss competitive threat from China, we still don't know its effect on profit margin. I am still set on buying Harta at the dip, but in the near future if Malaysian glove producers can't keep up with producers from abroad or gets stomped in terms of cost, then I may reduce my holdings accordingly.

Still too early to tell at the moment.

Posted by NatsukoMishima > 2022-02-10 16:24 |

Post removed.Why?

Posted by Keith Han > 2022-02-10 16:37 | Report Abuse

a bit risky to ask ppl sell a stock at 52week low to buy a stock at 52week high to cover lost..

Posted by NatsukoMishima > 2022-02-10 16:38 |

Post removed.Why?

Posted by NatsukoMishima > 2022-02-10 16:39 | Report Abuse

Do u think it is risk to buy at around rm 1 only !

Posted by NatsukoMishima > 2022-02-10 16:40 | Report Abuse

Mean while harta might drop to rm 2.xx - 3.xx !

Posted by Keith Han > 2022-02-10 16:54 | Report Abuse

I'm got holding some dnex also .. but dunno how to calculate rm4-6 , may be when oil price break through 120++..
For Hartalega , also dunno how to get rm2-3 , may be wehn market only willing give them PE10..

Posted by observatory > 2022-02-10 16:54 | Report Abuse

If a promoter predicts a stock to lose 40%, and another to gain 300% to 500% in a year, stay away. No one has such predictive power.

Checking his track records in his past comments, just 3 months ago he advised people to sell DNEX (!) to buy VIS, exactly when VIS share price peaked. VIS price has since lost 40%

___________________________________________________________________________
Stock: [DNEX]: DAGANG NEXCHANGE BHD

Sep 25, 2021 10:33 AM | Report Abuse

@autoven this stock wont go limit even QR is good....
VIS is different...it can go limit up ....but not for QR....think wisely.....

This kind of small NOSH easily conered all by sharks n bilis , if u are early birds u lucky , if u are late comers then u prepare slaughteted by sharks , a fast up stock will also fast drop if they font have FUTURE PLAN !


TO HOTSTUFF:

BETTER SELL OFF YOUR 1 M TICKETS TO ALL PEOPLE WHO ARE DESIRE TO DNEX , I BELIEVE U REALLY HAVE 1M TICKETS ON HAND NOW , I REALLY TRUST U MAN !

Posted by Zrenxy > 2022-02-10 17:30 | Report Abuse

Is time for hartalega tomorrow up

Posted by NatsukoMishima > 2022-02-10 17:43 | Report Abuse

Tonight think properly u still want to tahan glove downtrend until when ??

Posted by bang_miskin > 2022-02-10 18:00 | Report Abuse

@observatory our good friend here is troll, best to ignore him/her.

@Mini2021 while China and Malaysia may be serving different markets, we don't want to underestimate them. Moreover IF their product do become cheaper and better, we may have to soon directly compete with them. Our producers can't rest on their laurels.

Posted by CharlesT > 2022-02-10 18:04 | Report Abuse

Observatory is the only rational glove supporter in I3.

Then again,no point to buy n hold any glove co now. Better wait to see next few loss making Q results first. N c how then...

Posted by CharlesT > 2022-02-10 18:06 | Report Abuse

Personally i dare not invest in any glove co for the next few years...

Buying for short term trade on rebound play in between maybe lah...

Posted by Anxious > 2022-02-10 18:06 | Report Abuse

Kudos Observatory. Your clarity of thought is excellent.

I started in this investment game late. I am in my early 50s.

I set aside some money for investing in the stock market in 2020 when the FD rates fell to miserable levels last year.

Bought into companies like Shell and HSBC when the prices dropped to 25 year lows during the pandemic. Luckily made some money in those investments.

First bought Harta in January last year when the prices fell drastically due to short selling ban being lifted early Jan.

I recall reading analyst in late 2020 early 2021 still signing praises for Harta.

Within a month in 2021 I made 30k and then I got greedy.

Started buying more as the price went down always expecting it to rebound.

In hindsight, how I wished I had just cut losses and walked away.At one point I could have broken even taking into account my 30k gains.

Greed and foolishness got the better of me.

Now I'll probably soon be 45% down from my average price of RM9.00. It has been a painful experience.

I don't expect it to rebound back anywhere near my average price any time soon.

Even RM7.00 now seems to be wishful thinking unless a miracle happens.

My last chance to cut loss was probably when it was above RM6.00. That ship has also sailed.

I have now resigned to the fact that I'll be stuck in Harta for the foreseeable future.

Probably consider myself lucky if it stays above RM5.00 but the speed that it has gone down over the past few days makes me believe that the worst isn't over yet.

Used to console myself that the dividends are good but Obsevatory may be right and even that is now in doubt.

Just got to sit back and accept that this may have been my worst decision in my life and move on.

The stock market seems to be more like gambling than investing....