KUALA LUMPUR (Jan 29): Rubber glove stocks were active after UOB Kay Hian Securities (M) Sdn Bhd’s downgrade of the sector to “Underweight” while advising investors to take profit, as the sector has had a good run.

In a note to clients, UOB said it is time to lock in profits as the downside risks are burgeoning with no leeway for letdowns.

The sector was turning bearish on the back of rising concerns over unsustainable premium valuations, the research house said, adding now is a good opportunity to sell on strength.

Hartalega’s share price was down two sen or 0.17% to RM11.90 at midday break today with 260,000 shares done, for a market capitalisation of RM19.67 billion.

UOB maintained its “Sell” rating on Hartalega with an unchanged target price of RM8.04, based on 24 times price earnings to its financial year ending Dec 31, 2019 (FY19).

“The highly-anticipated new anti-microbial gloves (AMG) may face some competition, no thanks to Unigloves (UK) Ltd and BioCote Ltd, as they have both collaborated to launch Fortified (a similar functional product to AMG) in Europe earlier this month.

“Therefore we believe Hartalega has somewhat missed the first-mover advantage in this region,” UOB said.

The research house downgraded both Top Glove Corp Bhd and Kossan Rubber Industries Bhd to “Sell” with an unchanged target price of RM8 and RM7.18, based on 18 times price earnings to FY19 respectively.

On Top Glove, UOB reckoned valuations have run ahead of fundamentals and advocated to investors to take profit. 

“Although Top Glove is looking at more inorganic growth opportunities, future mergers and acquisitions initiatives should be smallish, seeing the Aspion Sdn Bhd buy would have already stretched net gearing to 0.6 times,” UOB said.

Top Glove’s share price rose one sen or 0.11% to RM9.51 at midday break, with 1.19 million shares done for a market capitalisation of RM11.94 billion.

Kossan stayed flat at RM8.72 with 187,100 shares traded, giving it a market capitalisation of RM5.57 billion.

Supermax Corp Bhd meanwhile slipped three sen or 1.29% to RM2.30, with 1.95 million shares transacted for a market capitalisation of RM1.5 billion.