KUALA LUMPUR (Feb 10): CGS-CIMB Research estimates that the three-day closure of Supermax Corp Bhd plants could negatively impact its net profit for the financial year ending June 30, 2021 (FY21) by 0.4%.
Its analyst Walter Aw estimates that Supermax's six plants in Meru, Klang account for about 50% of its total capacity of 26.2 billion pieces per annum.
"Assuming that all six of Supermax's plants in Meru, Klang are not operational for only three days, we estimate that the impact on our FY21F net profit forecast will be -0.4%.
"Our sensitivity analysis indicates that should the six plants be non-operational for one week, our FY21F net profit estimate for Supermax will be reduced by 1%," he said in a note today.
Yesterday, Supermax announced a temporary halt in operations at its production facilities in Meru, Klang for three days due to the detection of positive Covid-19 cases.
"We understand that Supermax has adopted stringent standard operating procedures (SOPs) to combat Covid-19 since 1Q20 and this is the first time it recorded positive Covid-19 cases; it suspects the infection was spread to its workers through third-party transporters," said Aw.
According to him, Supermax has a total of 12 factories, six of which are in the Meru, Klang area; its operations in other locations — Sungai Buloh, Selangor, Melaka and Perak — will not be affected, and will continue to operate as normal.
"Our channel checks found that, as of yesterday, less than 3.5% of Supermax's total estimated workforce of 3,300 tested positive for Covid-19. We understand that most of the workers who tested positive were asymptomatic; only six showed any Covid-19 symptoms and they have been hospitalised," said Aw.
Aw also said he understood that all Supermax workers who tested positive for Covid-19 worked at the same plant.
"However, Supermax decided to close all six plants in the Meru, Klang area to conduct deep sanitisation and disinfection activities," he said.
According to him, Supermax will continue to implement stringent precautionary measures and SOPs (in place since 1Q20) to prevent the spread of Covid-19 among its workers. These include efforts such as periodic Covid-19 screening for all its local and foreign workers, social distancing measures, and temperature checks.
Aw keeps Supermax FY21 to FY23 earnings per share estimates, pending further updates on this matter.
"We also retain our 'add' call and target price of RM11.80, based on 15 times 2022 price to earnings (P/E) (in line with the glove sector's five-year mean P/E)'
"We continue to view Supermax as an attractive play, backed by strong global glove demand owing to Covid-19, its higher-than-average margins in the sector (due to its original brand manufacturing model), and its solid dividend yields of 3.8% to 10.6% for FY21 to FY23," he said.
At 11.10am, Supermax rose two sen or 0.32% to RM6.22, valuing the company at RM17.25 billion.