Insights 5 : Hartalega Holdings Berhad - The King of Nitrile Gloves
Hartalega came out very strong during the recent AGM. What I like about Hartalega's message is the confidence it gives to the shareholders and market including their statement when asked on analyst earnings forecast :
KUALA LUMPUR (Sept 16): Hartalega Holdings Bhd, which expects an additional demand for 120About the author
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Intrinsic Value is calculated based on the assumptions you made. If we look at 20 research house, you will see 20 different intrinsic value or they call it fair value for the next one year, they call it TP. You can only has rough estimates, a range of value. Recent chat rooms, youtube, telegrams, facebooks, you will see a lot of "sifus" giving gloves with all types of valuations and it also "shows" that their "lack of understanding" of using PE (at least as a guide) when there is such a huge Supernormal Profits. What you can do, use the consensus of all the research forecasts for next 3 years, i.e. 2021, 2022, 2023 and also do your own CAGR from the earnings prior to covid and give the PAT a CAGR of 10%-12% for next 10 years (use the forecast for year 4 to 10 as their normal profits). So, you will now have 10 years forecasts (3 years from analysts) and 7 years your rough estimates. Give a weighting to all the earnings, first 3 years give it 3 points, next 4 years 2 points and and last 3 years 1 point. So, each year you will multiply with the points of each year forecast, and total all the profits and divide by the total points (3+3+3+2+2+2+2+1+1+1). This will give you a weighted average earnings per year for next 10 years. Then you multiply with average PE of that counter for last 10 years. Give it a 10-15% premium on the PE because gloves demand fundamental has improved globally. Example, last 5 years, PE of Top Glove is 25x, now you get PE of 29x. My personal calculation using CIMB analysts and my personal projection of normal profit, Top Glove is worth about RM70bil to RM80bil (today 19 Nov 2020 it is about RM55bil). I like to emphasize that valuation is for reference only, short term, market is based on sentiment. This valuation has consider 3 major points, Supernormal profit, back to mean ASPs and also improved demand globally as a result of pandemic.
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