Market strategy: Moving from recovery to expansion

The cyclical run in the market remains firmly intact throughout 1H2010 on three counts below:

• Market performance historically strongest when GDP accelerates
• Earnings-driven re-rating cycle never been shorter than 12 months from trough.
• Risk to earnings on upside, as economic growth accelerates.

Our economist expects GDP to expand by a robust 5.3% in 1Q10, and by 4.2% in 2Q10.  The macro growth momentum, however, is expected to decelerate, with GDP expanding by only 2.5% in 3Q10 and 2.1% in 4Q10 as the low base effect tapers off moving towards the second-half of the year.

The present rally is now coming to 10 months from lows seen in March 2009. 

Cyclicals are expected to deliver the strongest earnings rebound as end-demand and margin recovery kick in to accentuate the growth trajectory off a low base in 2009 where earnings were diluted by writeoffs and pre-emptive loss provisions.

Overweight stance maintained on the Glove sector, with buys on both Top Glove and Kossan

Despite meteoric share price appreciation for glove manufacturer stocks, valuation remains undemanding given robust earnings performance.  At current share prices, both Top Glove and Kossan are trading at PE of 11x and 10x FY10F earnings, well below its respective peaks of 30x and 18x.

Solid earnings growth as supplanted by

• capacity expansion, and
• positive newsflow

should lead to further expansion in PE multiples.

Key risks include

• a sudden surge in latex price,
• energy input costs or
• an unfavourable ringgit/US$ foregin exchange rate movement.

Benny Chew
AmResearch
Published in the Edge Jan 18, 2010

Are Malaysian rubber glove makers overstretched?

Are Malaysian rubber glove makers overstretched?
Published: 2010/01/14

Bulls say rally still has legs, valuations not outrageous while bears say stocks run ahead of fundamentals, correction due

While the first wave of the H1N1 infections has ebbed, Malaysian rubber glove makers continue to see their share prices soar, raking in double-digit gains in the first two trading weeks of 2010.

The sharp gains have raised eyebrows after share prices skyrocketed last year as demand for rubber gloves surged following the global H1N1 pandemic.

Shares of Top Glove, the world’s biggest rubber glove maker by production capacity, jumped by about 156 per cent over the past 12 months, and second-ranked Supermax has surged 560 per cent.

Malaysia supplies more than 60 per cent of world’s rubber latex gloves, widely used for infectious disease control purposes.

Can the H1N1 flu, a sticky issue for countries, help rubber glove stocks defy the law of gravity?

STILL CHEAP

It may be to some extent.

“The rubber glove industry is not cyclical. Unlike commodities, it’s not affected by the business cycle. This is a very good, long-term business,” said Ang Kok Heng, who helps manage about US$125 million at Phillip Capital Management in Kuala Lumpur.

“The surge in demand is not a one-off thing. The glove industry tends to have a very good retention ratio, that means new customers added because of the H1N1 flu will likely become long-term customers for glove makers,” he said.

Ang said he would only consider to switch out from glove makers when valuations become too expensive. In the case of mid-cap stocks, such as Kossan and Adventa, that means a price-to-earnings (PE) ratio of more than 15 times, he said.

The rally still has legs, said Choo Swee Kee, chief investment officer of TA Investment Management which has about US$200 million asset under management.

“Good earnings growth has put down valuations. The PE ratio for glove makers ranges between 8 to 15 times, that’s not like way above the market PE,” said Choo.

This week, five out of 14 analysts on Top Glove have revised their annual earnings per share forecasts, hiking them by 9.1 per cent on average, according to StarMine. StarMine’s SmartEstimate shows a predicted earnings surprise of 10.8 per cent for the year to August 2010.

SmartEstimates predict future earnings more accurately than consensus estimates by putting more weight on the recent forecasts of StarMine’s top-rated analysts.

“We expect another 10 to 15 per cent upside. We are holding on to our shares and we will accumulate those with the lowest PE,” Choo said.

Malaysia’s benchmark share index trades at around 15 times 2010 earnings, higher than Top Glove’s 13.5 times and Supermax’s 11.3 times, Thomson Reuters data showed.

Kossan and Adventa, which are smaller in both market share and size than Top Glove and Supermax, trade at single-digit PEs.

“VERY OVERBOUGHT"

Malaysian rubber glove makers are “very overbought, the bull will have to pause a bit,” said Stephen Soo, senior technical analyst at TA Securities.

On technical charts, the Relative Strength Indicator (RSI) for all Malaysian rubber glove makers are hovering around 90, way above the 70 level that marks the overbought territory.

Share prices of rubber glove makers may drop one-third over a period of two weeks when a correction takes place, said Soo.

“The share price gains have run ahead of 2010 earnings,” said a chief investment officer from a bank-backed fund management firm whose company policy does not allow him to be quoted.

While demand was strong, it remained to be seen if glove makers could ramp up production capacity fast enough to meet it. There was also a risk that surging raw material costs could dent profit margins, he said.

Infrastructure constraints, such as natural gas shortages, could derail companies’ expansion plans, industry players have said.

And the price of rubber latex, from which gloves are made, has risen by more than two-thirds since last July. -- Reuters

More gloves shipped at higher average selling prices

Supermax says glove demand strong, profit up
Written by Reuters
Thursday, 07 January 2010 20:34

KUALA LUMPUR: Malaysia's No 2 rubber glove maker Supermax expects another year of strong profit growth as fears about a resurgence of the H1N1 flu fuel demand for its products, a top executive told Reuters today.

Supermax may upgrade its earnings target for 2010 when it announces its full-year earnings for 2009 in February, managing director Datuk Seri Stanley Thai said.

The glove maker had previously guided for a net profit of RM133 million for 2010.

"2010 will continue to be a good year for the glove industry. We expect handsome profits," Thai said in a telephone interview.

Supermax has already received glove orders that will keep its factories busy for the next four to five months, he said.

Thai also said fourth-quarter net profit will be better than the third-quarter.

"We shipped more gloves at higher average selling prices in the fourth-quarter than the third-quarter," he said. — Reuters

Glove Sector 31.12.2009

http://spreadsheets.google.com/pub?key=t6TE7RNPw5F-C3fpPVBWFKQ&output=html

Glove sector on heat today!

Top Gainers


HAIO
1750 7.490 0.300 4.17%

ADVENTA
64836 2.910 0.230 8.58%

HLFG
5638 7.790 0.220 2.91%

LATEXX-WA
3440 2.330 0.160 7.37%

KOSSAN
4593 5.160 0.160 3.20%

TOPGLOV
13096 9.650 0.150 1.58%

EONCAP
10089 6.540 0.140 2.19%

LATEXX
24384 2.850 0.120 4.40%

AIRPORT
1194 3.920 0.120 3.16%

AFG
31268 2.750 0.120 4.56%

Top Glove posts RM65.2m 1Q net profit

The glove sector continues to be resilient and growing strongly.  Topglove is the leader in the group.  Watch the others too.


Top Glove posts RM65.2m 1Q net profit
Written by Loong Tse Min
Wednesday, 16 December 2009 14:50

KUALA LUMPUR: Latex glove maker Top Glove Corp Bhd whose share price surged Dec 15 on expectations of strong quarterly financial results on Wednesday, Dec 16 posted a 90.9% jump in net profit to RM65.2 million in its first quarter ended Nov 30, 2009.

In its results filing to the stock exchange during the midday trading break, the company attributed the strong growth in earnings to cost-savings measures implemented at all its factories, improvements in product quality, productivity as well as aggressive marketing strategies.

Revenue for the quarter grew 22.3% to RM472.3 million from RM386.1 million in the same quarter a year earlier, with earnings per share rising to 21.94 sen from 11.60 sen. No dividends have been declared for the period under review.

In the notes accompanying the quarterly filing, the company added that its group continues to strengthen its balance sheet and working capital position, currently in net cash position of RM222 million, with RM237.1 million cash in bank as at Nov 30, 2009.

The group also has fully redeemed the bonds outstanding before its maturity date in view of its strong cash flow position. According to the company, its finance cost for current quarter has reduced by 85% to RM400,000 from RM2.7 million in quarter ended Nov 30, 2008.

Going forward, Top Glove said: "The group is confident of continuous growth and good profitable performance in current financial year".

It disclosed that its factory in Klang has commenced installation of 16 new and more advanced glove production lines with completion expected by February 2010.

It has also begun CONSTRUCTION [] of another factory in Klang that will house an additional 16 production lines with target completion by July 2010. It is also installing nine more "latex concentrate centrifuge machines" in Thailand to be ready by January 2010.

The Top Glove group currently has 355 production lines in 19 factories with a capacity of 31.5 billion pieces of gloves per annum. Staff strength stands at 9,100 employees.

At 2.30pm, Top Glove was trading unchanged at RM9.53 with 400,700 shares changing hands.

http://www.theedgemalaysia.com/index.php?option=com_content&task=view&id=155812&Itemid=79


Top Glove Q1 net almost doubles
Published: 2009/12/17


Top Glove Corp Bhd (7113) said its first quarter net profit almost doubled to RM66.5 million on cost saving measures and aggressive marketing strategies.

Revenue for the quarter ended November 30 2009 rose 22 per cent to RM472.3 million from RM386.1 million previously.

"Top Glove has adapted well to the challenging business environment, resulting from cost-saving measures implemented at at our factories in Malaysia, Thailand and China.

"In view of the strong profit growth for the first quarter, we're optimistic of positive outlook for the next few quarters," chairman Tan Sri Lim Wee-Chai, said in a statement.

To meet higher demand for latex concentrate, Top Glove is installing nine more latex concentrate centrifuge machines in Thailand.
"We should be able to complete this upgrading works next month," said Lim.

Currently, the company is in net cash position of RM222 million, with RM237.1 million cash in bank as at November 30 2009. It has fully redeemed outstanding bonds before the maturity date.

Its finance cost is also down by 85 per cent to RM400,000 in the first quarter.

In the last 10 years, Top Glove's profits expanded at an average rate of 36 per cent. Its performance far outweighs global rubber glove demand growth of 10 per cent per year.

With installed capacity of 31.5 billion pieces of gloves a year, the world's biggest glovemaker continues to build on its size.

Factory 20, which is located in Klang, Malaysia, has commenced the installation of 16 new and advanced glove production lines and is targeted to be completed by February 2010.

As for Factory 21, it is being built and is expected to start operation towards the end of next year.

http://www.btimes.com.my/Current_News/BTIMES/articles/16top/Article/

Glove makers’ capacity expansion on track

Glove makers’ capacity expansion on track

Tags: Adventa Bhd | Brokers Call | CIMB Research | Hartalega Holdings Bhd | Kossan Rubber Industries Bhd | Latexx Partners Bhd | MARGMA | Rubber gloves ssector | Supermax Corporation Bhd | Top Glove Corporation Bhd

Written by Financial Daily
Thursday, 10 December 2009 11:05

Rubber gloves sector
Maintain outperform: Last week, we hosted a rubber glove day which gave around 40 fund managers and buy-side analysts access to the six biggest rubber glove companies in Malaysia — TOP GLOVE CORPORATION BHD [], SUPERMAX CORPORATION BHD [], KOSSAN RUBBER INDUSTRIES BHD [], HARTALEGA HOLDINGS BHD [], LATEXX PARTNERS BHD [] and ADVENTA BHD [].

The Malaysian Rubber Glove Manufacturers’ Association (MARGMA) gave the opening remarks and touched on the ABCs of gloves, development of the industry, challenges faced as well as the prospects for the industry. This was followed by four sessions of small group meetings for each of the six firms.

Demand prospects for rubber gloves remain favourable and some of the manufacturers have even brought forward their expansion plans to cater to the high orders. Factors that could extend the sector’s re-rating include the continuing uptick in demand from the healthcare industry, ongoing capacity expansion and strong earnings growth. We maintain our overweight stance.

All the glove stocks under our coverage remain outperform, with Adventa and Supermax staying as our top picks. We raise our earnings forecasts for Adventa and Top Glove by 1% to 10%.



The event confirmed the companies’ expansion plans. Adventa and Kossan appear to be the most aggressive in their expansion. Latexx and Supermax have brought forward their expansion plans to cater to the high demand.

We were particularly surprised by Adventa’s plans to add lines with output of up to 36,000 pieces per hour, higher than even the most efficient producer currently, Hartalega, whose latest lines can produce up to 35,000 pieces per hour.

Hartalega has set its sights on the number one spot in the world for nitrile gloves, a goal which we think is not out of reach.

Among the issues raised include recent government policies to reduce the number of foreign workers which is a concern. Nevertheless, increasing automation will reduce their reliance on manpower. Glove manufacturers also raised the issue of not having enough supply of natural gas which is the most cost efficient form of energy.

To reduce their reliance on natural gas, all but Latexx and Kossan are now using biomass facilities.

The main issue for investors is the possibility of a glut given the industry’s aggressive expansion. We do not think this is a problem given the strong demand and good long-term prospects in developing countries where per capita consumption is low.

On top that, MARGMA and the rubber glove companies believe that prospects for the rubber glove industry will continue to improve given the continuous support by the government and the favourable outlook for the demand for rubber gloves. — CIMB Research, Dec 9


This article appeared in The Edge Financial Daily, December 10, 2009.

Adventa surges on CIMB upgrade

Adventa surges on CIMB upgrade

Tags: Adventa | CIMB | Top Glove | Upgrade

Written by Joseph Chin
Thursday, 12 November 2009 10:38

KUALA LUMPUR: Shares of Adventa surged in early trade on Thursday, Nov 12 after CIMB Equities Research initiated coverage on the glove maker with an Outperform and a target price of RM4.12.

At 10.25am, it was up 17 sen to RM2.12 with 1.58 million shares done.

The research house said the prognosis for the medical glove industry is favourable given rising healthcare needs and greater awareness of the need for hygiene, especially with the rising incidence of health scares.

"Adventa is in a great position to tap into this growth as well as the growth arising from ageing populations around the world and more demand for elective surgery," it said.

CIMB Research said due to the company's smaller size relative to its biggest rival Top Glove, it pegged it to a 30% discount to its target market price-to-earnings of 15 times.

"This gives us an end-CY10 target price of RM4.12, which implies share price upside of 111%. We begin our coverage with an OUTPERFORM recommendation, premised on the potential share price trigger of improving quarterly earnings driven by its surgical glove and OBM segment as well as its ongoing expansion," it said.

http://www.theedgemalaysia.com/business-news/153469-adventa-surges-on-cimb-upgrade.html


Comment:  What gives?  Perception.

Glove makers take the lead

Glove makers take the lead

Tags: Adventa | Kossan | Supermax

Written by Joseph Chin
Thursday, 12 November 2009 16:31

KUALA LUMPUR: Glove manufacturers again saw renewed interest in late afternoon trade on Thursday, Nov 12, supported by analysts' positive outlook for the sector.

Adventa was up 29 sen to RM2.24 with 5.52 million shares done at 4.19pm after CIMB Equities Research initiated coverage on the glove maker with an "outperform" rating and a target price of RM4.12.

Supermax added 19 sen to RM3.83 with 6.54 million shares done while Kossan was up 15 sen to RM5.27.

http://www.theedgemalaysia.com/business-news/153518-glove-makers-take-the-lead.html

Latexx 17.10.2009

Valuation
http://spreadsheets.google.com/pub?key=tGjkSMyCWNewTHtuEfqzoVg&output=html

Its latest quarterly Q2 '09 result:
qtr EPS = 5.86 sen
annualised EPS = 4 x 5.86 = 23.44 sen

At today's price of $2.40, its PE (based on annualised EPS)
= 2.40/0.2344
= 10.24

Latexx is the 5th largest glove company in Malaysia.  Given its relatively smaller size, its growth is anticipated to be faster than the bigger glove companies (Topglove, Supermax) in the next 2 years. 

Kossan's share price is playing catch-up with the other companies PE valuations. 

Hartalega appears richly valued at its present price and market capitalization.

Glove companies

Valuation
Supermax, Topglove and Kossan

http://spreadsheets.google.com/pub?key=tIzNTWdhdVSJ803HE80Xn8Q&output=html

Rubber Glove Companies

Latexx appears to be succeeding in its aggressive growth plan. It is expected to post strong growth until 2012 as it ramps up current production capacity of 5.2 billion pieces a year to six billion pieces by the end of this year, 7.5 billion by 2010 and nine billion by 2012.

Latexx and Adventa have seen the most aggressive capacity expansion (as a percentage of current capacity) among rubber glove companies.  Nevertheless, Latexx is confident of selling the additional capacity as it currently cannot meet its customers' demand.  All its facilities are located in Kamunting, which ensures better quality control and lower operating costs. 

Adventa has a 15% share of the global surgical glove market.  As it is operating at close to full capacity, Adventa is planning to aggressively expand its surgical glove production from 250 million pieces a year to 350 million by early 2010 and 450 million by end-2010.

From the edge newspaper:  Focussing on FY 2010 valuations, the rubber glove companies are still cheap in an industry where Malaysia is the dominant player and where pricing power exists.  Adventa is the cheapest rubber glove company with a prospective FY2010 price-earnings ratio (PER) of only 7.5 times. 

Rubber glove companies offer a rare combination of being defensive and offering growth.  Investors would be familiar with those like Top Glove, Supermax, Kossan Rubber and Hartalega, but there are some smaller ones like Adventa, Latexx and Singapore-listed Riverstone that operate in interesting niches and perhaps offer better growth prospects as they start from a lower base.

Company Share price Market Cap
Top Glove 8.11 2409.8 m
Hartalega 5.45 1320.6m
Kossan 4.64 741.8m
Supermax 2.80 727.2 m
Latexx 2.27 443.0 m
Riverstone Holdings 0.44 331.0m (Singapore)
Adventa 1.73 218m
Medi-flex 0.09 103.3m (Singapore)
Shun Thai Rubber 1.60 81.0m (Thailand)

Glovemakers surge on upbeat reports on Top Glove

Glovemakers surge on upbeat reports on Top Glove

Tags: Adventa Bhd | AmResearch Sdn Bhd | Glovemakers | Hartalega Holdings Bhd | Kossan Rubber Industries Bhd | Latexx Partners Bhd | Maybank IB | Maybank Investment Bank Bhd | Supermax Corporation Bhd | Top Glove Corporation Bhd

Written by Surin Murugiah
Tuesday, 06 October 2009 23:18

KUALA LUMPUR: Glovemakers advanced today after analysts issued upbeat reports on TOP GLOVE CORPORATION BHD [] ahead of the release of the company's fourth quarter (4Q) results scheduled for Thursday, and on the outlook for the rubber glove sector.

AmResearch Sdn Bhd said that the demand outlook for rubber gloves remained intact at a healthy 8% to 10% growth per annum, adding that the (A)H1N1-related buying was estimated to have spurred global demand by an additional 14 billion to 15 billion pieces, on top of the 11 billion to 17 billion pieces from organic growth.

Top Glove surged to its highest level since Aug 2, 2007, today, jumping 5.5% or 41 sen to RM7.87, after Maybank Investment Bank Bhd (Maybank IB) and AmResearch both maintained their buy calls on the stock at RM7.46, with the former saying the company's 4Q09 results were expected to beat street estimates.

KOSSAN RUBBER INDUSTRIES BHD [] gained 3.22% or 14 sen to RM4.49, its highest close since Sept 28, 2007.

Meanwhile, LATEXX PARTNERS BHD [] jumped 7.14% or 15 sen to RM2.25; SUPERMAX CORPORATION BHD [] up 3.85% or 10 sen to RM2.70; ADVENTA BHD [] up 3.70% or 6 sen to RM1.68 while HARTALEGA HOLDINGS BHD [] added 2.52% or 13 sen to RM5.29.

Maybank IB said Top Glove's 4Q09 results should meet the research house's expectations, but above consensus while dividends may surprise.

"We continue to like Top Glove's commanding market leadership in the sector, earnings growth potential and solid balance sheet," said Maybank IB, which maintained its target price for the stock at RM8.30.

The research house said Top Glove's 4Q net profit could reach RM55 million to RM56 million, which would bring its full-year net profit to RM166 million to RM167 million, in line with its own but above street estimates of RM154 million.

"Growth drivers would come from the surge in orders (+10%-20% quarter-on-quarter) and expansion in earnings before interest and tax (Ebit) margins (+3%-4% q-o-q), capitalising on the (A)H1N1 flu outbreak whilst making headway into the Latin America market (Brazil and Argentina).

"Furthermore, a lower interest expense following the retirement of RM70 million in debt and cost savings from lower input costs were not fully passed on to customers. Latex cost, 52% of its operational expenditure, fell 14% q-o-q to RM3.80 per kg in June-August," it said.

The research house also said Top Glove's net cash position was believed to have grown for the fourth consecutive quarter, improving by about 40% q-o-q.

"With a higher cash pile, Top Glove may surprise with a higher dividend payout (FY08: 30%).

"Assuming a 40% payout (22 sen dividend per share), this will entail a dividend of 15 sen per share (+150% year-on-year) in 4Q. Top Glove had paid a 7 sen interim dividend year-to-date," it said.

Meanwhile, AmResearch raised its fair value for Top Glove to RM8.45 from RM8.30, and said it had raised its FY09-11 earnings forecast for the company by 2% to 8%.

It said the growth would be underpinned by slightly higher revenue growth from prospects of higher recurring orders coming mainly from sales of basic powdered gloves to Latin American countries, and better-than-expected sustainable margin going forward due to higher average selling prices and lower overall cost structures. "As such, we have increased our FY10F and FY11F dividend forecasts to 18 and 19 sen per share, respectively, premised on a 30% dividend payout.

"We are however, keeping our forecast of 15 sen per share for FY09F, but would not be surprised if management were to choose to reward shareholders. The group is in a strong net cash position with cash holdings of RM173 million as at 9MFY09," it said.

AmResearch said that Top Glove's expansion to boost installed capacity by about 10% to 34.5 billion pieces of gloves per annum from an additional 32 production lines by end-FY10F was on schedule.

It said the company's Factory 20 was set for completion by February 2010 and Factory 21 by July 2010.

"Though the stock has outperformed the FBM KLCI by 51% on a relative basis year-to-date, valuation is still undemanding as it is still valued below its historical 9-year average of 15 times.

"We reiterate our buy on the group's proven earnings deliverance backed by solid fundamentals, market share dominance in the industry, as well as better trading liquidity," it said, adding that the fair value of RM8.45 offered 18% upside potential.

Glove makers to ride on strong demand growth

Glove makers to ride on strong demand growth

Tags: Hartalega | Kossan | Top Glove

Written by The Edge Financial Daily
Friday, 14 August 2009 12:07

KUALA LUMPUR: Maybank Investment Research remains overweight on Malaysia's glove manufacturing sector, which has the top manufacturers in the world.

The research house said on Aug 14 it had raised the target prices of Hartalega and Top Glove by 19%-23% to RM6.50 and RM8.30. It also retained the Buy calls on Hartalega, Top Glove and Kossan.

It said expectation is for demand to grow by a strong 10%-12% per annum over the next five years, above its 5%-8% forecast.

Maybank Investment Research said the drivers are improved hygiene standards and healthcare awareness in developing countries like Latin America and Asia; higher incidences of major infectious disease outbreaks, an ageing population and rising economic and social conditions, and more outsourcing by large medical companies in US.

The challenges for the sector is the government's stand on foreign labour, double levy and tax benefits; lack of R&D in the industry; volatile latex prices and currencies, and energy issues.

However, glove makers should be able to continue passing on additional costs over time to mitigate exposure.

"We shall see selling prices being adjusted upwards in 3Q09 to accommodate latex prices' current uptrend," it said.

All producers are expected to post above-par core second quarter 2009 earnings, riding on lower material costs and orders surge owing to the H1N1 outbreak. Demand growth should be stronger ahead.

"We have raised Top Glove and Hartalega's FY09-12 net profits by 7%-13% but lowered Kossan's FY09 by 10% due to losses in structured currency product. The combined net profits of the producers are still expected to record a three-year compounded annual growth rate (CAGR) of 14%. Capacity expansion should support demand growth.

"Considering their dominant global market share, the sector's 2009-10 price-to-earnings ratio (PER) of 11 times to 13 times is undemanding relative to the FBM-KLCI 30's 17 times. We raise Hartalega's and Top Glove's TP to RM6.50 (+19%) and RM8.30 (+23%) respectively. We maintain Kossan's TP at RM5.30," it said.

From the Edge

Stocks to watch: Glove makers

Stocks to watch: Glove makers

Written by The Edge Financial Daily
Monday, 10 August 2009 23:20

KUALA LUMPUR: Glove manufacturers are likely to continue to be in focus on Tuesday, Aug 11 as governments, including Malaysia, step up measures to stem the spread of the A H1N1 flu virus, which has seen a marked increase in cases and fatalities.

The smaller capitalised glove manufacturers including ADVENTA BHD [ ADVENTA 2.090 -0.020 (-0.948%)], RUBBEREX CORPORATION (M) BHD [ RUBEREX 1.930 -0.070 (-3.500%) ], SUPERMAX CORPORATION BHD [ SUPERMX 2.980 -0.050 (-1.650%) ], KOSSAN RUBBER INDUSTRIES BHD [ KOSSAN 4.110 -0.040 (-0.964%) ], LATEXX PARTNERS BHD [ LATEXX 2.230 0.060 (2.765%) ] rose in active trade on Aug 10 and could continue to generate trading interest.

Larger capitalized manufacturers like TOP GLOVE CORPORATION BHD [ TOPGLOV 7.300 0.020 (0.275%) ] and Hartalega Bhd would also see trading interest.

However, after the hefty price gains in recent weeks, investors should also expect intermittent profit taking.

Glovemakers soar on H1N1 threat

Glovemakers soar on H1N1 threat

Tags: Kossan Supermax Top Glove

Written by Surin Murugiah
Tuesday, 11 August 2009 01:05

KUALA LUMPUR: The increasingly deadly outbreak of the influenza A (H1N1) virus threat sent the stocks of rubber glove manufacturers soaring on Aug 10, with some hitting their 52-week high.

With the death toll from the H1N1-related disease in Malaysia having reached 32 yesterday, demand for rubber gloves and masks have been increasing.

Inter-Pacific Research Sdn Bhd head of research Anthony Dass said he did not see any softening in the demand for rubber gloves and surgical masks at the moment.

“The strong demand due to the virus outbreak will continue to push the stock prices. This would translate into potentially good earnings for the companies,” he said.

Last week, OSK Equity Research in a report had said it remained overweight on the rubber gloves sector, and that the demand for gloves from the medical industry was strong, especially from developing countries.

It said that since the H1N1 outbreak has been raised to pandemic level, the governments of developed countries like US and Europe have urged all healthcare MNCs to stock up on rubber gloves, which has created short-term demand.

“Over the longer term, demand is expected to come from developing countries like China, India and Russia, which are gradually increasing their use of gloves.”

“Also, with US tightening Food and Drug Administration (FDA) regulations effective December 2008, the number of glove defects per batch would need to be reduced to qualify for entry to the US market,” it said.

This would reduce the supply of rubber glove exports to US due to the retention of “unqualified” gloves at the ports and hence creating new sales opportunities for the established rubber glove manufacturers, said the research house.

On Aug 10, the shares of ADVENTA BHD [ ADVENTA 2.090 -0.020 (-0.948%) ] rose almost 22% or 38 sen to close at its 52-week high of RM2.11, while RUBBEREX CORPORATION (M) BHD [ RUBEREX 1.930 -0.070 (-3.500%) ] added 15.6% or 27 sen to RM2.

SUPERMAX CORPORATION BHD [ SUPERMX 2.980 -0.050 (-1.650%) ] gained 10.99% or 30 sen to RM3.03, KOSSAN RUBBER INDUSTRIES BHD [ KOSSAN 4.110 -0.040 (-0.964%) ] up 4.3% or 17 sen to RM4.51 while LATEXX PARTNERS BHD [ LATEXX 2.230 0.060 (2.765%)
] rose 10.1% or 20 sen to RM2.17.

Supermax was among the most actively traded stocks yesterday with 11.6 million shares done, while Latexx saw some 10.4 million of its shares traded.

Meanwhile, TOP GLOVE CORPORATION BHD [ TOPGLOV 7.300 0.020 (0.275%)] gained seven sen to RM7.28.

HARTALEGA HOLDINGS BHD [ HARTA 5.260 -0.030 (-0.567%)], however, fell six sen to RM5.29.

From The Edge

Which one stock excites you in the glove sector?

Glove sector

No. Name Last Open High Low Chg Chg(%) BuyQ Buy SellQ Sell Volume
1. ADVENTA 2.14 2.15 2.02 2.05 -0.06 -2.84 43.0 2.05 13.6 2.06 3,776.9
2. HARTA 5.29 5.29 5.25 5.26 -0.03 -0.57 14.0 5.25 11.9 5.26 137.0
3. KOSSAN 4.15 4.19 4.10 4.12 -0.03 -0.72 1.0 4.12 15.0 4.13 605.8
4. LATEXX 2.20 2.24 2.13 2.23 0.06 2.76 42.0 2.22 86.0 2.23 8,078.0
5. SUPERMX 3.04 3.06 2.97 2.97 -0.06 -1.98 96.0 2.96 105.6 2.97 3,619.6
6. TOPGLOV 7.30 7.30 7.29 7.29 0.01 0.14 42.5 7.29 200.7 7.30 480.6


Which is the "best" company to choose in this sector?

Assess each of the above based on the following criterias:

• Sustainable future earnings and future earnings growth
• Profit Margin, ROE
• Market capitalization (small cap company can grow at faster rate)
• Debt/Equity Ratio
• Market valuation: P/E, P/B, P/S

A recent article in the Star newspaper mentioned that Adventa was the glove company with the lowest valuation. The company's price has since shot upwards by a huge percentage. From my analysis, another stock is perhaps more attractive.

Glovemakers shares up on rising demand

Glovemakers shares up on rising demand
Published: 2009/08/07


OSK Research has an 'overweight' rating on the sector, raising its target prices on some rubber glove stocks


SHARES of rubber glove companies are on a roll right now and will continue to move up, riding on the global outbreak of influenza A (H1N1).

OSK Research Sdn Bhd has an "overweight" rating on the sector, raising its target prices on some rubber glove stocks, in line with recent developments in the industry's spurring demand for rubber gloves.

The local research house organised plant tours to four rubber glove companies last month, namely Top Glove Corp Bhd (7113), Supermax Corp Bhd, Kossan Rubber Industries Bhd and Hartalega Holdings Bhd.

"For Top Glove, we recommend a buy with a target price of RM8.50 from RM7.40 previously and Supermax, also a buy with a target price of RM3.85 from RM2.69 previously," it said in a report yesterday.

"We are also recommending a buy on Kossan, with a target price of RM4.98 from RM4.48 previously as well as on Adventa, with a target price of RM1.87 from RM1.31 before," it added.

While it has revised its target price upwards to RM5.45 from RM4.10 for Hartalega, the research house has downgraded its call to "neutral" from "buy" previously, given that Hartalega's share price has caught up with the valuation.

OSK Research said demand for rubber gloves from the medical industry remains strong, especially from developing countries.

"But glove supply is still short. Since the H1N1 outbreak has been raised to a pandemic level, the governments of developed countries like the US and Europe have urged all healthcare multinational corps to stock up on rubber gloves, which has created short-term demand.

"Over the longer term, demand is expected to come from developing countries like China, India and Russia, which are gradually increasing their use of gloves," it said.

Also, with the US tightening its Food and Drug Administration regulations effective December 2008, the number of glove defects per batch would need to be reduced to qualify for entry to the US market.

This would reduce the supply of rubber glove exports to the US due to the retention of "unqualified"' gloves at the ports and hence create new sales opportunities for the established rubber glove manufacturers, said OSK Research.

http://www.btimes.com.my/Current_News/BTIMES/articles/RUBROLL/Article/

Glove Sector

Stock Data: Recent Stock Performance:

Current Price (7/10/2009): 3.92
(Figures in Malaysian Ringgits) 1 Week 4.3% 13 Weeks 2.6%
4 Weeks 21.7% 52 Weeks 86.7%

Kossan Rubber Industries Berhad Key Data:
Ticker: KOSSAN Country: MALAYSIA
Exchanges: KUL Major Industry: Chemicals
Sub Industry: Rubber & Tire Mfrs.
2008 Sales 897,194,335
(Year Ending Jan 2009). Employees: 665
Currency: Malaysian Ringgits Market Cap: 626,674,720
Fiscal Yr Ends: December Shares Outstanding: 159,866,000
Share Type: Ordinary Closely Held Shares: 83,457,672

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Stock Data: Recent Stock Performance:

Current Price (7/10/2009): 1.96
(Figures in Malaysian Ringgits) 1 Week 19.5% 13 Weeks 15.3%
4 Weeks 83.2% 52 Weeks 53.1%

Supermax Corporation Berhad Key Data:
Ticker: SUPERMX Country: MALAYSIA
Exchanges: KUL Major Industry: Chemicals
Sub Industry: Synthetic Fibers
2008 Sales 811,823,877
(Year Ending Jan 2009). Employees: 1,033
Currency: Malaysian Ringgits Market Cap: 519,929,200
Fiscal Yr Ends: December Shares Outstanding: 265,270,000
Share Type: Ordinary Closely Held Shares: 172,281,734

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Stock Data: Recent Stock Performance:

Current Price (7/10/2009): 4.50
(Figures in Malaysian Ringgits) 1 Week 10.8% 13 Weeks 23.0%
4 Weeks 65.4% 52 Weeks 216.9%

Hartalega Holdings Bhd Key Data:
Ticker: 5168 Country: MALAYSIA
Exchanges: KUL Major Industry: Apparel & Textiles
Sub Industry: Apparel Manufacturers
2009 Sales 443,204,000
(Year Ending Jan 2010). Employees: N/A
Currency: Malaysian Ringgits Market Cap: 1,090,404,000
Fiscal Yr Ends: March Shares Outstanding: 242,312,000
Share Type: Ordinary Closely Held Shares: N/A

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Stock Data: Recent Stock Performance:

Current Price (7/10/2009): 1.31
(Figures in Malaysian Ringgits) 1 Week 12.9% 13 Weeks 0.8%
4 Weeks 114.8% 52 Weeks 367.9%

Latexx Partners Berhad Key Data:
Ticker: LATEXX Country: MALAYSIA
Exchanges: KUL Major Industry: Miscellaneous
Sub Industry: Miscellaneous Companies
2008 Sales 223,255,443
(Year Ending Jan 2009). Employees: 1,210
Currency: Malaysian Ringgits Market Cap: 255,053,611
Fiscal Yr Ends: December Shares Outstanding: 194,697,413
Share Type: Ordinary Closely Held Shares: 113,422,478

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Stock Data: Recent Stock Performance:

Current Price (7/10/2009): 1.15
(Figures in Malaysian Ringgits) 1 Week 4.5% 13 Weeks -5.7%
4 Weeks 32.9% 52 Weeks 12.7%

Adventa Berhad Key Data:
Ticker: ADVENTA Country: MALAYSIA
Exchanges: KUL Major Industry: Drugs, Cosmetics & Health Care
Sub Industry: Medical, Surgical & Dental Suppliers
2008 Sales 247,930,470
(Year Ending Jan 2009). Employees: 1,273
Currency: Malaysian Ringgits Market Cap: 160,372,100
Fiscal Yr Ends: October Shares Outstanding: 139,454,000
Share Type: Closely Held Shares: N/A

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Stock Data: Recent Stock Performance:

Current Price (7/10/2009): .37
(Figures in Malaysian Ringgits) 1 Week 12.1% 13 Weeks 27.6%
4 Weeks 76.2% 52 Weeks 5.7%

Integrated Rubber Corporation Berhad Key Data:
Ticker: IRCB Country: MALAYSIA
Exchanges: KUL Major Industry: Metal Producers & Products Manufacturers
Sub Industry: Miscellaneous Metal Producers
2009 Sales 136,418,429
(Year Ending Jan 2010). Employees: 828
Currency: Malaysian Ringgits Market Cap: 87,619,700
Fiscal Yr Ends: January Shares Outstanding: 236,810,000
Share Type: Common Closely Held Shares: 127,681,046

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Stock Data: Recent Stock Performance:

Current Price (7/10/2009): 7.25
(Figures in Malaysian Ringgits) 1 Week 15.1% 13 Weeks 16.9%
4 Weeks 35.5% 52 Weeks 77.7%

Top Glove Corporation Berhad Key Data:
Ticker: TOPGLOV Country: MALAYSIA
Exchanges: KUL Major Industry: Apparel & Textiles
Sub Industry: Apparel Manufacturers
2008 Sales 1,377,931,000
(Year Ending Jan 2009). Employees: 6,573
Currency: Malaysian Ringgits Market Cap: 2,191,435,750
Fiscal Yr Ends: August Shares Outstanding: 302,267,000
Share Type: Ordinary Closely Held Shares: 224,502,987


http://spreadsheets.google.com/pub?key=tcTC-lG49Sy-qaoyZgKKjEQ&output=html