KUALA LUMPUR (Nov 6): Shares in Hartalega Holdings Bhd dipped 1.46% this morning after the glovemaker saw a 13% drop in its net profit to RM103.87 million in its second financial quarter ended Sept 30, 2019 (2QFY20) from RM120.22 million a year ago, due to lower average selling price (ASP) and higher packaging and fuel costs.

At 9.08am, Hartalega fell 8 sen to RM5.39, valuing the group at RM18.18 billion.

The lower ASP dragged the group’s quarterly revenue marginally lower to RM709.42 million from RM714.24 million in 2QFY19, the nitrile glove manufacturer’s exchange filing showed.

Despite lower profitability, Hartalega’s board declared its first interim single-tier dividend of 1.8 sen per share in respect of the financial year ending June 30, 2020 (FY20). The dividend is payable on Dec 27.

Hong Leong Investment Bank Bhd analyst Farah Diyana Kamaludin wrote in a note today that Hartalega's 1HFY20 core profit after tax and minority interest of RM199.4 million was below both Hong Leong's and consensus expectation.

"The results came in below both our and consensus expectations at 42.3% and 41.5% respectively. The key culprit for the results shortfall was lower ASP (-2.2% quarter-on-quarter, -6.9% year-on-year) and higher effective tax rate (15.4% in 2QFY19 versus 24.1% in 2QFY20).

"We cut FY20-22 numbers by 12.2%, 14.1% and 13.8% respectively as we account for lower ASP moving forward," Farah Diyana said.

She said Hong Leong maintained its "hold" call on Hartalega shares but with a higher target price of RM5.10, from RM4.78 previously.