A Brief Look at Supermax

Supermax Corporation Berhad

Business Description:
Supermax Corporation Berhad is a Malaysia-based investment holding company. The Company operates in three segments:

1. manufacturing of gloves; 
2. trading of gloves, and 
3. investment holding. 

It has nine factories that manufacture various types of latex gloves, which are exported to over 146 countries, including the United States, European Union, the Middle East, Asia and South Pacific countries. As of December 31, 2009, the Company's subsidiaries were Supermax Latex Products Sdn. Bhd., Supermax Glove Manufacturing Sdn. Bhd., Maxter Glove Manufacturing Sdn. Bhd., Supermax Incorporated, Spenser Glove Manufacturing Berhad, Supermax International Sdn. Bhd., Supermax Energy Sdn. Bhd., Seal Polymer Latex Products Sdn. Bhd. and SPI Gloves Sdn. Bhd.

Current Price (7/1/2011): 4.46
2009 Sales 803,632,619
Employees: 1,033
Market Cap: 1,514,004,980
Shares Outstanding: 339,463,000
Closely Held Shares: 253,143,204

Recent Financial Results

Announcement Date		Financial Yr. End		Qtr	Period End		Revenue RM '000		Profit/Lost RM'000		EPS		Amended
08-Nov-10		31-Dec-10		3	30-Sep-10		235,104		38,117		11.24		-
26-Aug-10		31-Dec-10		2	30-Jun-10		234,825		45,856		13.51		-
19-Apr-10		31-Dec-10		1	31-Mar-10		220,652		51,473		15.18#		-
19-Feb-10		31-Dec-09		4	31-Dec-09		196,417		44,112		13.01#		-

# adjusted for 2010  1/4 Bonus


Estimated EPS for 2011 = 4*11.24 = 44.96 sen
At price of 4.46, it is trading at prospective 2011 PE  = 4.46 / 0.4496 = 9.92x

Historical
5 Yr
PE range   5.6 - 11.2
DY range   3.2% - 1.3%

10 Yr
PE range    6.5 - 14.5
DY range   2.9% - 1.2%

Year     DPS     EPS
2000     0.0       3.7
2001     0.7       2.1
2002     0,7       4.3
2003     0.9       7.0
2004     1.4     11.9
2005     2.6     12.9
2006     1.4     14.0
2007     3.8     16.9
2008     2.6     19.2
2009     3.4     37.8
9M10    0.0    39.91     NTA 2.0300

Capital changes

2000  3/5 Rights @ RM 1.10

2003  1/3 Bonus, 2/3 Rights @ RM 1.00

2006   1/4 Bonus

2007   1 to 2 Share Split

2010   1/4 Bonus

Supermax to increase nitrile glove mix to about 30 per cent

Supermax to increase nitrile glove mix to about 30 per cent
Posted on November 11, 2010, Thursday

KUCHING: Supermax Corporation Bhd (Supermax) plans to increase the nitrile glove mix to about 30 per cent by gradually converting its existing natural rubber powder-free production lines to nitrile lines.

Currently, Supermax produces a mix of 80 per cent natural rubber gloves and 20 per cent nitrile.

OSK Research Sdn Bhd (OSK Research) understood that about 70 per cent of all its lines were convertible, except for the remaining 30 per cent, which were dedicated for the production of natural rubber powder gloves.

The research house pointed out that this change in product mix was in tandem with the more stable demand for nitrile gloves.

OSK Research understood that management also intended to increase its current production of about 20,000 pairs per annum (p.a) to 2.5 million p.a by end-2011.

This was in line with its plan to gradually tweak its product mix towards higher margin gloves.

As mentioned before, management expected to increase its total capacity by 3.1 billion pieces of gloves by end-2010 and another 4.1 billion at end-2011, bringing its annual capacity to 21.7 billion pieces by end-2011.

The research house noted that management anticipated latex prices to peak at about RM8.50 per kilogramme (kg) at end-2010 followed by a fall in the first quarter of the financial year 2011 (1QFY11) despite the fact that rubber trees would be undergoing their winter season.

This was because management believed the current price run-up was fuelled by speculation rather than being due to actual shortage.

OSK Research’s target price for the company was RM7.84 per share based on a price earnings ratio of 13 times financial year 2011 (FY11) earnings per share (EPS).

Going forward to FY11, management expected a net profit growth of about 20 per cent, contributed by higher associate contribution, the establishment of more regional distribution centres and the production of higher margin examination gloves.

http://www.theborneopost.com/?p=74547

Supermax

Date announced 8-Nov-10
Quarter 30/09/2010 Qtr 3
FYE 31/12/2010

STOCK Supermx
C0DE  7106 

Price $ 4.39 Curr. PE (ttm-Eps) 8.27 Curr. DY 2.00%
LFY Div 8.80 DPO ratio 23%
ROE 26.1% PBT Margin 17.6% PAT Margin 16.2%

Rec. qRev 235104 q-q % chg 0% y-y% chq -1%
Rec qPbt 41448 q-q % chg -10% y-y% chq -11%
Rec. qEps 11.24 q-q % chg -17% y-y% chq -7%
ttm-Eps 53.08 q-q % chg -2% y-y% chq 69%

Using VERY CONSERVATIVE ESTIMATES:
EPS GR 5% Avg.H PE 9.00 Avg. L PE 7.00
Forecast High Pr 6.10 Forecast Low Pr 2.48 Recent Severe Low Pr 2.48
Current price is at Middle 1/3 of valuation zone.

RISK: Upside 47% Downside 53%
One Year Appreciation Potential 8% Avg. yield 3%
Avg. Total Annual Potential Return (over next 5 years) 11%

CPE/SPE 1.03 P/NTA 2.16 NTA 2.03 SPE 8.00 Rational Pr 4.25



Decision:
Already Owned: Buy Hold Sell Filed; Review (future acq): Filed; Discard: Filed
Guide: Valuation zones Lower 1/3 Buy; Mid. 1/3 Maybe; Upper 1/3 Sell

Aim:
To Buy a bargain: Buy at Lower 1/3 of Valuation Zone
To Minimise risk of Loss: Buy when risk is low i.e UPSIDE GAIN > 75% OR DOWNSIDE RISK <25%
To Double every 5 years: Seek for POTENTIAL RETURN of > 15%/yr.
To Prevent Loss: Sell immediately when fundamentals deteriorate
To Maximise Gain & Reduce Loss: Sell when CPE/SPE > 1.5, when in Upper 1/3 of Valuation Zone & Returns < 15%/yr

Prices set to rise as glove makers protect profit margin

Prices set to rise as glove makers protect profit margin

By Ooi Tee Ching
Published: 2010/11/10


THE average selling price of rubber gloves, at US$30 (RM93) per 1,000 pieces, is set to trend higher because manufacturers need to protect profit margin, Supermax Corp said.

"We are quoting selling prices more frequently. We do it on a weekly basis to better match the volatile currency movement and rising raw material costs. We need to preserve our profit margin," said executive chairman and group managing director Datuk Seri Stanley Thai.

In the recent quarterly reporting season of March to June, many rubber glove manufacturers suffered lower earnings from slower than expected cost pass-through of rising latex prices and weakening US dollar.

Yesterday, latex-in-bulk rose 12 sen to close at RM8.42 a kg at the Malaysian Rubber Exchange.

Rising rubber prices bode well for rubber tappers.

Rural and Regional Development Minister Datuk Seri Shafie Apdal had reportedly said that with rubber prices at an all-time high, smallholders were reaping a monthly gross income of RM4,000.

Thai acknowledged rubber tappers' good fortune and noted manufacturers' extra security measures in securing latex supply.

"At current pricing, our daily supply of four tankers of latex is worth RM1 million on the road. Latex is very precious. These tankers are fully-insured against hijacks," he told reporters in Kuala Lumpur yesterday.

Asked if latex supply is somewhat hampered by floods in southern Thailand, he said: "The flood might have affected dry rubber supply at low-lying warehouses but there's no supply disruption for wet latex as these are stored in raised tankers."

Thai revealed that costlier natural rubber latex had prompted many rubber glovemakers to switch a bigger portion of their production lines to make synthetic rubber gloves.

Thai said Supermax will churn out more powder-free nitrile gloves.

"Nitrile gloves used to make up a quarter of our total output. We're raising it to be a third," he said.

On fuel supply, Thai said rubber glovemakers had, again, appealed to the government to allocate more natural gas quota to them.

"We recently met with Pemandu (Performance Management & Delivery Unit) for the National Key Economic Area on rubber sector and highlighted some infrastructure gaps. The industry needs another 100 million mmBtu/hourof natural gas," he added.


Read more: Prices set to rise as glove makers protect profit margin http://www.btimes.com.my/Current_News/BTIMES/articles/rub09/Article/#ixzz14tQpZDua

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Hartalega gains on Q2 net income jump
Published: 2010/11/10

Hartalega Holdings Bhd, a Malaysian rubber-glove maker, rose to its highest level in more than three months in Kuala Lumpur trading after posting a 49 per cent jump in second-quarter net income.

Its shares gained 1.3 per cent to RM5.60 at 9:10 a.m. local time, set for their highest close since July 19. -- Bloomberg



Read more: Hartalega gains on Q2 net income jump http://www.btimes.com.my/Current_News/BTIMES/articles/20101110092520/Article/index_html#ixzz14tRxFudG

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Latexx Q3 profit rises 41.3pc
Published: 2010/11/10

Latexx Partners Bhd's pre-tax profit rose 41.3 per cent to RM20.17 million for the third quarter ended Sept 30, 2010 from RM14.28 million in the same quarter last year.

Its revenue jumped 60.7 per cent to RM129.88 million from RM80.84 million previously.

For the first nine months ended Sept 30, 2010, Latexx''s pre-tax profit surged 93.9 per cent to RM67.53 million from RM34.83 million in the same period of 2009.

The company's revenue increased 73.1 per cent to RM390.53 million from RM225.59 million previously. - Bernama



Read more: Latexx Q3 profit rises 41.3pc http://www.btimes.com.my/Current_News/BTIMES/articles/20101110170400/Article/index_html#ixzz14tSABzaC

Glovemakers upbeat despite rising costs

Glovemakers upbeat despite rising costs

Tags: Datuk Seri Stanley Thai | Hartalega Holdings Bhd | Kuan Mun Keng | Low Bok Tek | Supermax Corp Bhd

Written by Chong Jin Hun
Monday, 25 October 2010 11:45

TEFD: How is the company coping with the headwinds in the form of costlier latex and the weakening US dollar?
Hartalega executive director Kuan Mun Keng: Hartalega is primarily focused on nitrile gloves, so we are largely not affected by the impact of rising natural rubber costs. Nitrile material, which is purchased in US dollar, provides a natural hedge to our US dollar-denominated sales. Moreover, improving productivity allows us to provide better pricing support to our customers.

Latexx Partners executive chairman and chief executive Low Bok Tek:
Although not new to the glove industry, the sustained high level of latex prices is still the biggest challenge faced by glovemakers like Latexx. Thus, the company is focusing on the premium products segment that is relatively more resilient, for example the nitrile gloves segment. Through the advancing of in-house nitrile production technology and intensified marketing efforts, a thinner and more cost-effective high quality nitrile glove has been developed and introduced to the market.

The company also strategically positioned itself in the premium natural rubber (NR) gloves segment, with the launching of the first-in-the world NR powder-free gloves with unquantifiable protein level. This premium product range is currently the most effective solution to the threats of protein allergy for glove users.

In summary, we strongly believe that with the company’s ability to pass-on costs to customers, coupled with our strategies to focus on the premium segments in both nitrile and natural rubber, we are able to cope with the temporary headwinds and move on to advance our market presence.

Supermax Corps executive chairman and group managing director Datuk Seri Stanley Thai: Volatility in commodity prices and foreign exchange are not new to us. They are part of our ongoing day-to-day business that we need to monitor closely, especially when the volatility is high. All glove manufacturers adjust their product pricing. In fact, the higher the volatility, the more frequently glove manufacturers and exporters have to adjust glove prices upwards. With the current high volatility, glove makers are adjusting prices at least once or twice a month. We are also seeing that manufacturers are switching more production lines to produce synthetic nitrile gloves since the pace of price increases in nitrile latex is slower.

How has the demand for gloves been?
Kuan: During the H1N1 outbreak, every manufacturer was very bullish as demand was high and supply was tight. Recently, the World Health Organisation announced that H1N1 had moved into the post pandemic stage. However, the impact on Hartalega is reduced because users are still switching to nitrile gloves due to high natural rubber prices. Nitrile gloves are actually cheaper than natural rubber gloves now. In the absence of any health epidemic, demand will still grow due to healthcare reform, population growth and the expansion of the healthcare industry. But we are bracing ourselves for more competition as our peers are looking into or have started producing nitrile gloves.

Low: The demand growth for gloves has remained healthy although the concern for H1N1 has faded.  Upon normalising, the demand for gloves still grows at 10% to 12% annually which indicates a remarkable upside for any industry. Over the years, growing hygiene awareness and increased healthcare spending have made gloves a necessity in the healthcare sector, especially, in developed economies, thus making the industry resilient even when economy is slowing down.

Thai: The demand for gloves remains strong particularly in the healthcare industry. I have found demand and consumption to be stable, as evidenced by the outbound sales of gloves from our customers’ distribution warehouses. However, due to the high volatility of foreign exchange and increasing glove prices, the majority of customers are ordering or replenishing their stocks on a just-in-time basis. There are no back orders problems now for regular glove products. We have also seen the delivery lead time reduced from 90 to 120 days at the height of the HIN1 outbreak to 45 to 60 days at present. That means it is now back to normal delivery lead time.

How will the price hike help to sustain the company’s earnings?
Kuan: Hartalega has already increased the prices of rubber gloves in accordance with the advice from The Malaysian Rubber Glove Manufacturers’ Association (Margma) and the rising costs of natural latex. As for nitrile, prices have remained the same over this period. Our earnings are sustainable because customers continue to switch from natural rubber to nitrile gloves.

Low: Latexx has increased its glove prices in accordance with rising raw material costs and the weak US dollar. Latexx has a mechanism to adjust its prices to pass on the higher latex costs and weakening exchange rates of US dollars to the customers, otherwise we would have to bear the cost. The customers understand the situation.

Thai: Supermax has increased glove prices in tandem with the increase in latex prices and the soft US dollar. However, margins will be squeezed due to the time lag in executing the orders. Supermax remains confident of meeting the FY10 profit guidance of at least RM168 million in profit after tax. We have taken into account of the strong ringgit and higher latex prices.

This article appeared in The Edge Financial Daily, October 25, 2010.

So, you like Glove Sector - Which Stock will you Pick?

Analysis of the Glove Sector.
https://spreadsheets.google.com/pub?key=0AuRRzs61sKqRdDM1ZFNXQ2ZPRHBYcFJjd1lDNFVYdFE&hl=en&output=html

The top 6 glove companies are priced at RM 8.7 billion in market capitalization.  They generated a total of about RM 766 million in earnings the last 12 months.

Glove makers advance after CIMB Research maintains overweight on sector

Glove makers advance after CIMB Research maintains overweight on sector
Written by Surin Murugiah
Friday, 01 October 2010 15:29

 KUALA LUMPUR: Rubber glove makers on Bursa Malaysia advanced in the afternoon session on Friday, Oct 1 after CIMB Research maintained its overweight  on the sector and said that despite considerable headwinds encountered by the sector this year, demand for rubber gloves continued to grow at a healthy clip.

At 3.15pm, Supermax was up 15 sen to RM3.94, Hartalega gained 14 sen to RM4.84, Latexx rose 13 sen to RM2.57, Top Glove, Kossan and Adventa gained 10 sen each to RM5.23, RM3.07 and RM2.50, respectively, while Rubberex added three sen to 87 sen.

CIMB Research in a report on Friday said with continued technological advancement of glove products and facilities, Malaysian rubber glove manufacturers would maintain its leadership in the global market.

In light of the positive long term prospects of the industry, the research house maintained its overweight call. All the glove stocks under its coverage remain as Outperforms, said CIMB Research.

“Potential re-rating catalysts include the continuing uptick in demand from the healthcare industry, ongoing capacity expansion and strong earnings growth.

“The recent sharp pullback in share prices has made the sector even more attractive with undemanding average P/Es of 7-8 times. Supermax and Latexx remain our top picks,” it said.

http://www.theedgemalaysia.com/business-news/174572-glove-makers-advance-after-cimb-research-maintains-overweight-on-sector-.html

Supermax 2Q earnings jump 77.9% to RM45.8m

Supermax 2Q earnings jump 77.9% to RM45.8m

Written by Joseph Chin
Thursday, 26 August 2010 13:36
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KUALA LUMPUR: Supermax Corp Bhd posted RM45.85 million in earnings in the second quarter ended June 30, up 77.9% from RM25.78 million a year ago, underpinned by strong revenue growth, cost savings and productivity.

The glove maker said on Thursday, Aug 26 group revenue rose by 24.6% or RM46.34 million to RM234.82 million from RM188.48 million a year ago, on the back of strong global demand for rubber gloves as well as higher selling prices.

“However, despite a challenging operating environment, the group did well to record profitability growth over the corresponding quarter a year ago,” it said.

Supermax said profit before tax and profit after tax rose by 55.8% (RM17.5 million) and 77.9% (RM20.1 million) respectively. The improvement in profitability is attributed to the revenue growth as well as cost savings from higher efficiency and productivity from improved processes and refurbished lines.

It declared dividend of 2.5 sen a share.

http://www.theedgemalaysia.com/business-news/172547-supermax-2q-earnings-jump-779-to-rm458m.html

Comparative Analysis of Glove Companies

Comparative Analysis of Glove Companies
http://spreadsheets.google.com/pub?key=tiEBLAmYR0EJiE7ccJcc8bw&output=html

A quick look at Supermax (19.4.2010)

Latest:
A quick look at Supermax (19.4.2010) Q1 2010
http://spreadsheets.google.com/pub?key=telQsoPdo0K4BY0D2VQg_1Q&output=html

Notes:
http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/ba387758ae37412b482568a300466fb6/a3900c5dbc98b9824825770a001ca756/$FILE/1Q%20Financial%20Results%20-%20Notes%20-%20Qtr%20Ended%2031032010.pdf



Previous:
A quick look at Supermax (19.2.2010) Q4 2009
http://spreadsheets.google.com/pub?key=tET25tonDBAwf2VRc9KCI0A&output=html

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."

http://www.btimes.com.my/Current_News/BTIMES/articles/bv25a/Article/

Supermax: Future Prospects and Internal target for FY2010

Prospects

The rubber glove industry continues to be on a strong growth path despite the current global financial challenges and global economic uncertainties. In addition to the organic growth of 8-12% annually, global demand has been boosted by the ongoing H1N1 pandemic and growing demand from emerging markets as well as the healthcare and hygiene sectors.

The Group currently operates 8 wholly owned manufacturing plants and has 5 overseas distribution centres. The growing demand which is continuously being tapped by the Group’s wide global network of 750 distributors in over 145 countries and 5 distribution centres augurs well for the Group in terms of business stability and sustainability in the long term. The Group’s investment in overseas distribution since year 2001 has benefited and yielded greater market penetration in selected market territories.

The ongoing refurbishment works as well as the construction of its new Meru plant which encompasses the installation of 16 new lines with added capacity of 2.3 billion pieces of gloves per annum, is also expected to contribute to the Group’s performance going forward.

For the current financial year, the Group has achieved earnings per share of 48.37 sen, which had already surpassed its original internal target of a minimum 27 sen for year 2009 as well as the revised target of 44 sen. In view of this better than projected performance, the Company has now revised the internal target for FY2010 from the initial target of 50 sen earnings per share to 62 sen or RM168 million Profit after Tax for FY2010.

http://announcements.bursamalaysia.com/EDMS/edmsweb.nsf/ba387758ae37412b482568a300466fb6/da19a43ca011aaac482576cf003baf58/$FILE/SCB%20Q4%2709%20Bursa%20Anncmnt%20Notes%205pm.pdf

Rubber glove companies enjoy pricing power and steadily rising sales

Judging from the capacity expansion by rubber glove companies, it appears that larger glove companies like Top Glove, Supermax and Sempermed (Thailand) have more moderate expansion plans as a percentage of existing capacity, while smaller ones like Latexx and Adventa have more aggressive expansion plans and are likely to show higher earnings growth in 2010. 

An oversupply of rubber gloves is unlikely in 2010 but could be a worry in 2011 when more capacity comes onstream. Assuming that the 150 billion-a-year medical glove market grows by 8% a year, an additional capacity of 12 billion gloves will be required per year.  Rubber glove companies have been able to pass on higher costs arising from rising latex prices, with Top Glove increasing prices again in January 2010. 

Nevertheless, producers of nitrile gloves may now enjoy better margins as the cost advantage that latex gloves enjoy over nitrile gloves may have narrowed as latex prices have risen faster than nitrile prices.  Ratings of Malaysian rubber glove companies are still cheaper than those of Ansell, SSL International and the Malaysian market.

The Edge
1.2.2010
By Choong Khuat Hock


Comments:

The whole glove industry is growing.  Due to capacity expansion and their smaller sizes, the smaller glove companies are expected to show faster earnings growth than the bigger glove companies.

The industry business is still resilient.  Profit margin is either maintained or improving.  Glove companies are still able to pass the cost to the customers.  How long will this last?

This industry is highly competitive.  The business is driven by volume and price.  When capacity to supply outstrips demand, those companies with durable competitive advantage are expected to survive.  Those low cost producers will be the big winners and leaders.  Those companies that automate their production with good quality control will probably be able to lower their costs per unit through increasing productivity.  It is possible that those leveraging on low human labour costs now with no or few plans for increasing automation of the manufacturing processes, may eventually lose out to the former in the future both in terms of quality, productivity and costs.

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 companies

Valuation
Supermax, Topglove and Kossan

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