Company Spotlight on Hartalega Holdings Berhad (5168)

By Stella Goh – Market Data Analyst | 6 March 2020  


Hartalega Holdings Berhad (HARTA) is an established Malaysia-based investment holding company founded by Kuan Kam Hon and is headquartered in Kuala Lumpur. HARTA is primarily involved in the business of producing latex and nitrile gloves. It has grown to be the world’s largest nitrile glove producer with the capability of manufacturing 34 billion gloves per year and with plans to progressively expand to 44.7 billion gloves in 2020.

HARTA was listed on Bursa Malaysia’s Main Market on 17 April 2008. The group has continued the technological innovations that help to ensure their gloves are manufactured with equal emphasis on efficiency and quality, a key reason why they are trusted as the Original Equipment Manufacturer (OEM) for some of the world’s biggest brands.

The company has a workforce of 7,800 people based in 8 dedicated manufacturing facilities. It has won many prestigious accolades in both local and international front. The latest was in 2019 for Gold in Export Excellence, Exporter of The Year and The Edge Billion Ringgit Club Corporate Awards. It has also received recognition from Forbes Asia, KPMG and Asia Money.

Business Model

HARTA provides a comprehensive range of products known for its superior quality and critical protection. Examples include nitrile gloves, latex gloves, surgical gloves and laboratory gloves.

As the most automated glove production company, its automated process not only improves efficiency but also eliminates product contamination resulting from human contact. HARTA produces soft stretchy nitrile gloves that emulate the properties of natural rubber latex. The nitrile gloves also eliminate the chances of protein allergy risks that are usually associated with rubber latex.

All gloves produced by HARTA are purchased by healthcare practitioners, food processing workers, lab workers and other professionals. Presently, HARTA’s export markets span across North America, Europe, Asia Pacific, Africa, Russia and Middle East.

Financial Review

Based on past 5 financial years’ revenue chart above, its revenue grew year-on-year (y-o-y) from FY2015 (+3.51%), FY2016 (+30.75%), FY2017 (+21.59%), FY2018 (+32.04%) to FY2019 (+17.52%). On a CAGR basis, HARTA has grown 20.62% based on 5 years. The group’s strong revenue was achieved on the back of improved sales volume which grew by 10.1% year-on-year to 28 billion pieces of gloves. The US and European Union remain key export markets accounting for 54% and 25% of their total exports respectively. (Source: Annual Report 2019)

HARTA has recorded a RM93.441 million increase in gross profit, translating to a growth of 15.20% from RM614.762 million in FY2018 to RM708.203 million in FY2019. Based on 5 years CAGR basis, the gross profit has grown 13.99%.

The increase in gross profit for HARTA was supported by increased contribution from the United States and Europe in tandem with the growing global demand for nitrile gloves. The group was well-positioned to meet this demand growth given their continuous expansion in production capacity via their Next Generation Integrated Glove Manufacturing Complex (NGC). (Source: Annual Report 2019).

The Profit After Tax (PAT) of HARTA rose 3.48% from RM439.632 million in FY2018 to RM454.938 million in FY2019. On a CAGR basis, the Profit After Tax (PAT) grew by 14.29% which was in line with the growth in revenue and gross profit.

Cash Flow Statement

The net cash from operating activities has provided a positive cash flow of RM627.399 million in FY2019 as compared to RM403.949 million in FY2018 indicating that the company is healthy and has enough cash to use for business expansion.

The net cash from investing activities in FY2019 (-RM428.602 million) was mainly due to the additions to capital work-in-progress (RM398.412 million), additions to Property, Plant and Equipment (PPE) (RM33.057 million) and additions to intangible assets (RM1.459 million). The negative cash flow indicates that the firm is investing in its business for growth. (Source: Annual Report 2019)

The net cash from financing activities in FY2019 (-RM206.644 million) was mainly due to dividend paid (RM286.177 million) and interest paid (RM10.620 million).

Is the company able to pay back its liabilities?

Based on liquidity ratio calculation, HARTA has a current ratio of 2.179 times in FY2019 indicating that the company does not face any liquidity issues as it is capable of paying back its liabilities (411.889 million) if any unforeseeable circumstances occur. HARTA is able to do so by using current assets such as inventories, trade & other receivables, tax assets, cash, bank balances and short-term investments amounting to RM897.442 million.

Prospect and Challenges

HARTA has allocated RM630 million for Plant 6 and Plant 7 at their Next Generation integrated Glove Manufacturing Complex (NGC) in Sepang as well as RM115 million to integrate the Industry 4.0 technologies for all activities related to gloves production and manufacturing by connecting to computers for data analytics and artificial intelligence (AI). (Source: New Straits Times, 26 July 2019)

HARTA said the NGC Plant 5 was fully commissioned during the quarter while first line of Plant 6 was expected to begin commissioning in Q1 2020 with annual installed capacity of 4.7 billion pieces. For Plant 7, which has commenced construction, would cater to small orders focusing more on specialty products with an annual installed capacity of 3.4 billion pieces. (Source: New Straits Times, 5 November 2019). According to managing director Kuan Mun Leong, the company’s annual installed capacity allows it to ramp up the output from the current 36.6 billion pieces of gloves to 44.7 billion pieces per annum by FY2022. (Source: The Malaysian Reserve, 7 August 2019)

HARTA has launched the world’s first non-leaching antimicrobial glove (AMG) in United Kingdom.  The unprecedented innovation provides active protection against healthcare-associated infections (HAIs). The antimicrobial glove is developed in collaboration with antimicrobial Research and Development (R&D) company Chemical Intelligence UK, which has built-in antimicrobial technology proven to kill micro-organisms in order to prevent the spread of infections. This product is set to be available in hospitals around the world and is being produced at a lower cost in order to reduce the barriers to access. With this technology, the bacteria coming into contact will be exposed to the antimicrobial activity, which in independent testing, achieved up to a 5-log (99.999 per cent) kill rate within just 5 minutes of contact. (Source: New Straits Times, 7 June 2018)

Rating System

Return on Equity (ROE) = Average

Revenue [5 years CAGR] = Good

Net Earnings [5 years CAGR] = Average

Basic Earnings per Share (EPS) [5 years CAGR] = Average

Interest Coverage = Good

Quality of Earnings = Average


Based on the calculation of Discounted Earnings Model, HARTA has an intrinsic value of RM14.126. The current share price of HARTA is RM6.23 which makes it an undervalued stock (as at 5 March 2020). HARTA has a beta of 0.719 (500 days) indicating that the share price is less volatile than the current market. Based on the computation of Compound Annual Growth Rate (CAGR), HARTA has an expected market return of 4.93%.

In conclusion, HARTA has achieved a strong performance in FY2019 with the highest revenue, gross profit and profit after tax over the past 5 years. Its prospect remains bright as the expansion of Next Generation Integrated Glove Manufacturing Complex (NGC) is set to increase capacity from RM36.6 billion to RM44.7 billion pieces of gloves per annum by FY2022 boosted by the adoption of Industry 4.0 technologies, Internet of Things and integrated manufacturing operations. The demand growth is expected to continue particularly in the near-term given the ongoing COVID-19 outbreak across the globe.


The research, information and financial opinions expressed in this article are purely for information and educational purpose only. We do not make any recommendation for the intention of trading purposes nor is it an advice to trade. Although best efforts are made to ensure that all information is accurate and up to date, occasionally errors and misprints may occur which are unintentional. It would help if you did not rely upon the material and information. We will not be liable for any false, inaccurate, incomplete information and losses or damages suffered from your action. It would be best if you did your own research to make your personal investment decisions wisely or consult your investment advisor.

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