Hartalega tops RM10 as Covid-19 drives glove shares’ seemingly relentless rise

Hartalega tops RM10 as Covid-19 drives glove shares’ seemingly relentless rise
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KUALA LUMPUR (May 21): The FBM KLCI closed up 16.99 points or 1.18% today at 1,452.11, helped by share price gains in index-link rubber glove manufacturers on resurgent concerns about the Covid-19 pandemic, amid doubts about the development of a vaccine. 

Among rubber glove manufacturers, Hartalega Holdings Bhd’s share price rose past RM10 for the first time today, as doubts about the development of a Covid-19 vaccine led to buying of healthcare-related shares on Bursa Malaysia.

“The glove companies have just gone exceedingly high and it is really beyond fundamentals. Unless the results are good, the push now [in share prices] is unsustainable,” Inter-Pacific Securities Sdn Bhd head of research Victor Wan told theedgemarkets.com.

Across Bursa, the exchange saw 7.15 billion shares worth RM4.66 billion traded. Top gainers included KLCI stocks Petronas Gas Bhd (PetGas), Top Glove Corp Bhd and Hartalega. 

Top Glove and Hartalega are also constituents of Bursa’s healthcare index, which closed up 6.37% to become the top percentage gainer among Bursa indices.

Across Bursa, leading gainer PetGas' share price closed up RM1.94 or 12.78% at RM17.12. Hartalega rose 58 sen or 6.16% to RM10, after the stock rose to its intraday high at RM10.16.

PetGas' share price rose today after the company declared yesterday a first interim single-tier dividend of 16 sen a share. The group also reported that its net profit dropped to RM368.12 million for the first quarter ended March 31, 2020 (1QFY20) from RM515.46 million a year earlier.

Today, the most active stock across Bursa was Velesto Energy Bhd, which registered a volume of some 277 million shares. The stock’s price closed down half a sen or 2.94% at 16.5 sen.

Yesterday, oil and gas (O&G) support services provider Velesto reported that its net profit stood at RM16.33 million for 1QFY20 versus a net loss of RM22.22 million a year earlier.

Today, analysts said they were mindful of uncertainties over Velesto’s rig utilisation against a low crude oil price environment.

"Despite the strong results for 1Q, we are taking a prudent stance to lower our utilisation rate assumptions for FY20-21 to factor in the uncertainties in drilling schedules, moving forward. We adjust our utilisation rate assumption downwards to about 70% from over 80%,” Hong Leong Investment Bank Bhd analyst Sheikh Abdullah wrote in a note today.

Kenanga Investment Bank Bhd analyst Steven Chan wrote in a note today that Kenanga believes Velesto’s outlook remains uncertain.

"Velesto posted a solid set of 1QFY20 results, turning around from losses last year, thanks to higher rig utilisation (86% versus 66%), coupled with some cost-saving efficiencies. However, we believe its outlook remains uncertain, as four of its rigs chartered to Petronas Carigali could face underutilisation risks.

"Given the uncertain outlook despite the solid set of 1QFY20 results, we suggest a “take profit at strength” strategy when trading the counter, in anticipation of weaker quarters ahead,” Chan said.

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