KUALA LUMPUR (Feb 4): RHB Research Institute expects Supermax Corp Bhd to distribute special dividends in the form of cash or shares for the third quarter ending March 31, 2021 (3QFY21) and 4QFY21.

Its analyst Alan Lim said in a note today that he emerged from an analyst briefing by the company feeling positive on its long-term prospects.

According to Lim, the company’s net cash level had surged to RM3.41 billion or RM1.32 per share as at the end of December last year from RM856 million six months ago.

“Additionally, it currently holds 151.9 million treasury shares, which could be utilised as dividends in the form of shares or for listing purposes on the SGX (Singapore Exchange),” he said.

Lim also believes that the group’s margin will improve in the next quarter due to higher average selling prices (ASPs) and a volume contribution from Plant 12B.

“Although its EBITDA (earnings before interest, taxes, depreciation and amortisation) margin declined quarter-on-quarter (q-o-q) in 2QFY21, we expect this to be temporary,” said Lim.

He noted that the reason behind the weaker margin was a sudden surge in the raw material price of nitrile butadiene (NBR) when the ASP had been set earlier.

“We expect Supermax to increase its ASP in 3QFY21 to reflect the higher NBR price,” he added.

Looking into next quarter, he estimated the group’s earnings to still rise on a quarterly basis.

“This is driven by better ASPs and higher sales volume due to the first full-quarter contribution from Plant 12B,” he said.

Recall that Supermax completed Plant 12B in December 2020. As a result, its capacity increased from 24 billion pieces per annum (ppa) to 26.2 billion ppa.

Lim maintained his FY21 to FY23 earnings forecasts for Supermax as he kept his ASP assumptions unchanged.

“Our FY21 to FY23 blended ASP [assumptions] are US$89 (RM360.27), US$57 and US$48 [respectively],” he said.

Lim reiterated his "buy" call on Supermax with a target price (TP) of RM10.60 due to its stronger earnings prospects for 3QFY21, expectations of special dividends and a positive news flow from its venture to build a manufacturing plant in the US.

At 9.52am today, Supermax had fallen nine sen or 1.33% to RM6.69, valuing the company at RM18.2 billion.