The virus was declared the world’s first global influenza pandemic in 41 years, after the World Health Organisation (WHO) upgraded alert level to highest at Phase Six.
To date, there has been a total of 27,737 cases reported worldwide, including 141 deaths. While there are no casualties in Malaysia, total number of confirmed cases is now 11.
AmResearch said on June 12 that this bodes well for Top Glove Corp and Kossan given the need for greater vigilance and stricter measures by governments worldwide.
It said with the pandemic declaration, Health Minister Datuk Seri Liow Tiong Lai announced more drastic measures including greater screening at entry points into the country and controlling human traffic from an affected township or village would be discussed at the National Inter-Ministerial Influenza Pandemic Committee, to be held next week.
The research house said that it now appears that the influenza outbreak would last longer than initially thought, since the virus was firstly discovered back in mid-March in Mexico.
"Recall, we had expected a rise in demand for examination rubber gloves since start of the outbreak. We now think there could be earnings surprise coming from continuous rising demand as a consequence to increased severity and prolonged manifestation of the virus attack.
"As such, we are not discounting possibility of an increase in global demand for rubber gloves to exceed +5%. Total annual consumption was estimated at 135 billion pieces last year," it said.
AmResearch said Top Glove had earlier guided an increase of approximately 6.5 billion pieces of gloves, based on their expectations and experience during the Severe Acute Respiratory Syndrome outbreak in March 2003.
Although both rubber glove manufacturers would benefit from this, it said Top Glove was in a more advantageous position as compared to Kossan.
"This is due to Top Glove’s low capacity utilisation rate of 75%-80% and higher product mix of more affordable latex examination gloves (non-powder and powdered).
"We are maintaining our earnings forecast at this juncture, pending Top Glove’s third quarter results scheduled for June 23. Reiterate BUY on both Top Glove (fair value: RM6.70 per share based on price-to-earnings PE of 13 times FY10F earnings) and Kossan (FV: RM4.90 per share based on PE of 11 times FY10F earnings)," it said.