Brokers still bullish on gloves

Glove manufacturers: Buy

Nomura Securities Malaysia says the recently passed healthcare reform bill in the US will boost sentiment on the shares of glove makers like Kossan Rubber (7153) , Supermax and Top Glove. It has a "buy" call on all three stocks.

The historic development in the US last Sunday will have a widespread impact and the immediate-term effects will all lead to an increased demand for healthcare from now on, the stockbroker said.

Nomura sees glove makers as only standing to benefit at the moment from these healthcare developments, given that gloves are relatively price-inelastic necessities.

"Besides the positive sentiment generated by the passing of the reform bill, we see all the companies as key long-term beneficiaries given their US sales exposure, with Kossan and Supermax being more well-placed to capitalise on demand upticks," the stockbroker said in a report on March 22.

Kossan Rubber makes half of its sales from the US, while Supermax has 42 per cent sales coming from there. Top Glove's US sales from the US is only 26 per cent.

"Given that Supermax pursues OBM model, its distribution arm, Supermax Inc, has existing ties with hospitals, nursing homes and dental clinics. This allows it to more directly tap in to any increased demand coming from those networks."

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