Thursday 28 Mar 2024
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KUALA LUMPUR (Feb 17): Glove counters rebounded this morning with Supermax Corp Bhd, Careplus Group Bhd, Comfort Gloves Bhd and Top Glove Corp Bhd on the list of top gainers.

Supermax was at the top of the top gainers list on Bursa Malaysia this morning. Just before lunch break, it ended at 3.75% or 22 sen to RM6.08. 

Careplus is also on the top gainer’s list with its stock price up 5.29% or 11 sen to RM2.19.

Top Glove and Comfort Gloves are also on the Top 30 gainers list this morning. 

Top Glove gained 1.49% or nine sen to RM6.15 while Comfort Gloves is up 3.44% or 9 sen to RM2.71. 

Kossan Rubber Industries Bhd’s share price also rose in Bursa Malaysia morning trade. This was a day after the rubber glove manufacturer’s fourth quarter financial results announcement ended Dec 31, 2020 (4QFY20).

At the time of writing, Kossan had risen eight sen or 2.03% to RM4.02.

At RM4.02, Kossan had a market capitalisation of about RM10.32 billion. It saw some 5.9 million shares transacted. It also declared a second interim dividend of three sen per share, together with a special dividend of eight sen per share — a total of 11 sen — to be paid on March 17.

An analyst covering the gloves industry said Kossan’s results that were released last night boosted confidence in the market for the sector.

“Kossan guided that ASP [average selling price] was up [in the fourth quarter ended Dec 31, 2020 (4Q)] and is expected to sustain for most of this year… At first, the market was worried that ASP would start declining soon but Kossan’s results do not reflect that,” he told theedgemarkets.com this morning.

A head of research in a foreign house pointed to "some positive newsflow" surrounding the industry that had spurred interest in the sector again this morning.

Kossan’s net profit for the financial year ended Dec 31, 2020 (FY20) surged more than threefold to a record RM1.09 billion. The stronger results were mainly due to the improved performance in the glove and cleanroom divisions.

Despite the results, AmResearch maintained its "hold" call on Kossan with a lower fair value of RM4.20 (from RM4.80) based on a lower price-earnings ratio (PER) of 21 times.

“We cut our target PER by a further 10% to take into account the risk of a down cycle in the glove sector as a result of successful rollouts of Covid-19 vaccines globally,” AmResearch said in a report today.

The research house, however, raised its FY21 net profit forecast by 28% by increasing its FY21 ASP assumption to US$45 per 1,000 pieces from US$40 per 1,000 pieces.

AmResearch made no changes to its FY22 forecast estimates.

MIDF Research had also lowered its target price (TP) for Kossan, cutting it to RM7.33 from RM10.02. Nevertheless, the research house maintained its "buy" call for the stock.

“Our target price is adjusted as we roll over our base year to FY22. Our current target price is based on an unchanged 22.0x PER of FY22F EPS [earnings per share] of 33.3 sen.

“Our PER valuation is based on Kossan’s 10-year average, which is also the range that was used prior to the Covid-19 pandemic. We keep our ‘buy’ recommendation as the retracement in share price has presented value. Topping that is the elevated demand for rubber gloves. Potential risks to our call include drastic fall in ASP, production and supply chain disruption. Dividend yield is expected at 3.0%,” said MIDF Research in a report today.

Meanwhile, Hong Leong Investment Bank (HLIB) Research had today adjusted its target price for Kossan slightly higher to RM5.22, from RM5.12 which it cut to just yesterday. The research house also has maintained its "buy" call on the glove manufacturer.

“We value Kossan using with their pre-pandemic five-year average PE [price-to-earnings] multiple of 24x (CY15-19) based on sustainable earnings in a post-super normal earnings environment (FY23) summed with free cash flows (both discounted back to PV) generated during the boom period,” said HLIB Research said in a report today.

It expects Kossan to continue to capitalise on strong glove demand by adding about 3.5 billion pieces capacity in FY21.

HLIB Research yesterday cut its TPs on rubber glove giants Top Glove and Kossan.

The research house explained that it changed its valuation methodology from a straight price-to-earnings multiple to a modified discounted cash flow valuation.

In a note yesterday, the research firm lowered Top Glove’s TP to RM8.06, from RM10.54 previously, while still maintaining its "buy" call on the counter. Meanwhile, Kossan’s TP was lowered to RM5.12 from RM7.80.

Despite the cuts in TPs, HLIB Research maintained its "overweight" call for the glove industry.

It noted that despite share prices correcting downwards, it does not expect vaccine rollout to be as straightforward as the market suggests as logistical, procurement, anti-vax movement and second strain issues could derail efforts and thus provide support for glove demand.

“For the foreseeable future, we believe that glove demand and ASPs will be driven by testing frequency and vaccine rollout using gloves. For the remainder of CY21, we expect the vaccination demand for gloves to more than offset the decline from testing demand. Even with global supply expected to rise by ~20%, we expect there to be a supply shortage of circa 12.4 billion pieces in CY21,” it said.

Also in the news yesterday, Top Glove announced share buyback by purchasing 8.08 million more shares in the open market for a price between RM6.05 and RM6.15, totalling RM49.27 million.

Edited ByLam Jian Wyn & Joyce Goh
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