Glove companies had always been one of my favorite choice on KLSE stocks.
Last year, I sold my holding on Supermx because I need some cash to build my "value-stock" portfolio. About two months ago, I decided to invest again into glove company. And this time I choose Hartalega.
The reasons:
- Good profit margin (around 15% ~ 20%), much higher than Topglove/Supermx/Kossan.
- Impressive ROE ( > 30%).
- Asset-equity-ratio only 1.5, leverage ratio even lower than Topglov.
- High growth rate.
Hartalega is still expanding fast while others glove-manufacturers are facing slow-down in growth. According to its report, the production capacity of Harta would be doubled in 2009, and increase for another 50% in 2010. This growth rate is similar to that of Topglove ten years ago.
And the most attractive point of Hartalega is its expansion into nitrile-glove business. Currently, the sales of nitrile-glove accounted for 80% of Harta's revenue. We known that the profit margin of nitrile-glove is much better than latex-glove. And the nitrile-glove market also had a higher growth potential in future.
(That's why Kimberley-Clark had decided to exit latex-glove business, and focus on nitrile-glove production since 2006.)
Hence, I believe that the high margin, high ROE and high growth rate of Hartalega are sustainable. According to its expansion plan, Hartalega may become the world's largest nitrile-glove manufacturer in the next few years.
My average entry price is around RM4.70 per share. Currently, Harta is the single stock that has the highest weight in my portfolio. I'm going hold it for at least 5 years.
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