KUALA LUMPUR (April 18): Hong Leong Investment Bank had today upgraded Hartalega Holdings Bhd to buy from hold on the glove manufacturer's share price weakness and amid a weaker ringgit versus the US dollar.

In a note today, Hong Leong analyst Sheikh Abdullah said Hartalega's share recommendation upgrade also took into account the belief that its weak fourth quarter earnings has been largely priced in.

"We are adjusting our FY19-21 earnings downwards by 4.4% as we account for expected lower volumes on market share losses due to competitive industry pressures within the nitrile glove space. Post earnings revision, our target price (TP) decreases to RM5.33 from RM6.12.

"Despite the earnings and TP cut, we are upgrading Hartalega to a BUY due to (i) the anticipation of a weak 4QFY19 has been largely priced in, (ii) valuations have come off significantly in recent times, with the stock trading below its 3-year mean, having not traded at these levels since Oct 2017, and (iii) sequentially weaker ringgit sentiment which should put export plays in [favour]," Sheikh Abdullah said.

At Bursa Malaysia today, Hartalega shares were trading unchanged at RM4.73 at 11:23am, after falling to their lowest so far today at RM4.69. The stock saw 2.13 million shares transacted.

"We are upgrading (Hartalega) to a BUY on valuations (trading below its 3-year mean) as we believe the share price weakness has now offered sufficient buffer," Sheikh Abdullah said.