[HARTA (5168) - AGM 2019 Meeting]
HARTA is the largest producer of Nitrile Glove, producing about 34bil units of glove a year.
Fiscal Year 2019:
Turnover YoY increased by 17.5% and CAGR increased by 26.1% (FY05-FY19).
Profit after tax YoY increased 3.4% and CAGR increased 28.8% (FY05-FY19).
Net profit margin is 16%.
Earning per share - YoY increased by 3.0% and CAGR increased by 16.0% (FY08-FY19).
Dividend per share - 8.2 cents, Dividend Payout Ratio 60%.
Turnover YoY increased by 17.5% and CAGR increased by 26.1% (FY05-FY19).
Profit after tax YoY increased 3.4% and CAGR increased 28.8% (FY05-FY19).
Net profit margin is 16%.
Earning per share - YoY increased by 3.0% and CAGR increased by 16.0% (FY08-FY19).
Dividend per share - 8.2 cents, Dividend Payout Ratio 60%.
✅Q: How does management ensure that the company remains competitive?
A: In the short term, we will focus on cost control and automation to
enhance operational efficiency and avoid falling profit margins. In the
long term, we will expand production, investing in Industry 4.0 to
reduce labor demand, develop new products for customers in different
fields, and leverage AMG to highlight and protect our market share.
✅Q: How does management respond to the China-US trade war?
A: China medical gloves have an export tax to US starting in September.
We expect this will be good for Harta, as US buyers will look for glove
sources from Malaysia, but markets outside the US may be affected as
China will sell their gloves to them. Our marketing team will continue
to focus on the market to ensure that we are prepared for everything
before the market changes.
✅Q:
How much influence does natural gas have on the company? How long does
it take to pass the cost to the customer? How much impact on FY2020's
profit margin?
A: Based on short notice, we cannot immediately transfer costs to
customers. It usually takes us 2-3 months to pass the cost to the
customer. As for the impact of net profit is less than 1%
✅Q:
What percentage of turnover and net profit does AMG account for? When
do you expect to get FDA approval? Will the United States be the largest
market? Once the permit is obtained, how much turnover can it bring?
A: At present, the turnover of AMG gloves is still very small, because
it is still in the initial stage of the product. FDA approval is
expected in the second half of 2020. The US will be the largest glove
market, but now it is difficult to predict the turnover that can be
generated.
✅Q: Is the ERP (Enterprise Resource Planning System) upgraded? What is good for the company?
A: On Apr 19, the ERP System has been upgraded at the NGC plant. The
same upgrade will be launched at Bestari Jaya and is expected in 2020.
The benefits of ERP are that the order from shipment to shipment will be
integrated, labor and raw material planning will be strengthened, and
the entire process will be integrated.
✅Q:
The Trade Receivable Ageing Analysis of the annual report states that
there is a debt overdue of RM18.2mil for more than 121 days. How much
was recovered in FY2020? Is it about customer A who accounts for 27% of
the turnover? How can companies avoid becoming too dependent on a single
customer?
A: The account receivable of RM18.2mil has been recovered in May 19,
and customer A currently accounts for 27% of the turnover. We provide
60% of their needs, and we have been working with Customer A for more
than 20 years. These customers buy a lot of gloves, and we can also do
everything we can to increase production efficiency and reduce
production downtime because the company does not need to switch product
types, colors and sizes.
✅Q: Why did the Benefit in Kind (BIK) of management increase from RM 0.38mil last year by RM17mil?
A: The reason for the increase is that Director uses ESOS. These
consultations have been written in the annual report Note19 (c).
✅Q: What percentage of profit margin will management be satisfied with?
A: At of now, our profit margin is ranging 4-5% and it is higher than
our peers. We have confidence in AMG, and customer B. Braun also takes a
positive view. They can influence to hospitals to use AMG gloves. And
because of market competition, we have to reduce profit margins, which
is unavoidable.
✅Q: How does the company keep R & D talents in the company
A: Some R & D colleagues haven't joined us; and some of them have
been with us for more than 20 years. We are still hiring talent. We
provide our colleagues in the R & D department with the freedom and
the all equipment needed. In addition, we also have a new R & D
center, which is a good working environment. Of course, the salary
package offer is very good. Harta is a leader in the industry, and this
honor has made colleagues in the R & D department willing to stay
longer.
✅Q: If AMG sells well, how long does it take the company to convert all production lines into AMG products?
A: We can switch from ordinary gloves to AMG at any time.
Team Opinion:
The management has great confidence in the company's future during the AGM meeting. Although Harta's FDA pass will not be available until the second half of 2020 next year, we believe management is confident to obtain the permit.
Management also revealed that once AMG sells well, they can convert all
production lines into AMG products in a short time. Therefore, it can
quick win in the AMG market. Although Harta's turnover is not as good as
TopGlove, the company has been able to produce close to 60% of
TopGlove's turnover with fewer production lines, and its profit margin
is 4-5% higher than its peers. Even if raw material prices rise, the
company still has room to make profit.
Louis Yap
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