Rubber Product Manufacturers

Re: Rubber Product Manufacturers

Postby winston » Fri Jan 11, 2019 8:57 am

CIMB Research overweight on glove makers, likes Kossan, Supermax

In its research report issued on Friday, it said its top picks in the sector are Kossan and Supermax.

“We believe that glove counters deserve to trade higher given its:-
i) businesses’ defensive nature
ii) inelastic global demand for gloves and
iii) robust EPS growth (three-year EPS CAGR of 20.4%)

The downside risks are stiffer-than-expected pricing competition and/or sharp strengthening of ringgit vs. US$.

It estimates the sector’s capacity to rise 17.8% in 2019F to 142.9 billion gloves per annum vs. 13.1% in 2018.

It explained that while headline numbers exhibit aggressive capacity build-up in 2019, investors should take into account three factors:
i) new capacity is commercialised on a gradual basis,
ii) glove makers decommission older plants with new capacity acting as replacement capacity
iii) glove makers can delay additional capacity to prevent a supply glut.

Malaysia’s global market share will grow beyond the current 63%.

China and Thailand glove producers are also expanding their capacity, this is unlikely to be a major threat to Malaysian glove makers. Its channel checks reveal that:
i) most of this expansion replaces less efficient and older production capabilities (20 to 30 years old), as well as
ii) Malaysia glove makers’ technological advances being meaningfully ahead of other countries.


The research house was not overly concerned about the recent strengthening of ringgit vs. US$ (YTD:+1% and +2% since Dec 1, 2018) and cost hikes (0.7% higher gas cost and 10%
minimum wage hike).

“In our view, this will be more than offset by the recent weakening of raw material prices (45-50% of total production cost) such as nitrile butadiene prices (-13% on-quarter in 4QCY18) and ongoing cost efficiency efforts.

“For every 1% weakness in US$ against the ringgit, we estimate that net exposure to glove makers’ earnings is only 0.5%-0.6%. This does not take into account the cost pass-through mechanism that allows glove makers to share cost savings/increases,” CIMB Research pointed out.


Source: The Star

https://www.thestar.com.my/business/bus ... U4J03WV.99
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Re: Rubber Product Manufacturers

Postby winston » Fri Jan 11, 2019 3:59 pm

AmInvestment Research upgrades glove sector to 'overweight'

KUALA LUMPUR (Jan 11): AmInvestment Bank Research has upgraded the glove sector to “overweight” on the back of robust demand growth expectations for FY19.

In a note today, the research house said according to the Malaysian Rubber Glove Manufacturers Association (Margma), the rubber glove industry has been growing at an average of 8–10% for the past 25 years and it expects this to continue in FY19.

It said the expected robust growth is underpinned by the expanding global healthcare sector as well as the increased awareness on the importance of hygienic practices throughout the industry, especially in emerging markets such as India and China.

“Currently, glove consumption per capita for emerging markets such as India and China is still low at around 2–6 gloves compared with circa 100–280 gloves for developed countries.

“Positively, we believe the nitrile-based rubber (NBR) price will continue to decline due to the falling prices of butadiene, which is an input cost for nitrile gloves.

“As NBR is a key input material for nitrile gloves, this is beneficial to the 'Big 3' producers (Top Glove, Kossan, Hartalega) as lower NBR prices will widen the nitrile rubber gloves’ margins,” it said.

Source: The Edge

http://www.theedgemarkets.com/article/a ... overweight
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Re: Rubber Product Manufacturers

Postby winston » Fri Mar 22, 2019 9:53 am

not vested

Rubber Gloves – Malaysia

4Q18 Report Card: Slowing To A Halt

The 4Q18 reporting season saw all glove producers’ earnings coming in within expectations.

Notably, ASPs were flattish as margins mildly contracted.

We think the sell-down in valuations fairly reflects industry fundamentals but there may be earnings downside as this is only the onset of a downcycle owing to demand-supply imbalance.

Maintain UNDERWEIGHT.

Source: UOBKH

https://research.uobkayhian.com/content ... d468732e0a
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Re: Rubber Product Manufacturers

Postby winston » Fri Apr 19, 2019 8:04 am

not vested

PublicInvest downgrades rubber gloves sector to underweight

KUALA LUMPUR: PublicInvest research has downgraded the rubber gloves sector to underweight from neutral, previously as it expects price-earnings contraction to continue.

"Despite the recent selldown, we believe the sector is still trading at unattractive PE valuations and could potentially contract closer to historical average of 21-26x (previously we pegged our valuations at 24-33x forward earnings).

"In addition, we cut the sector’s FY19-20F earnings forecasts by 3-14%," it said in a note.

The research house said there will be capacity expansion in the sector over the near term to meet the surge in demand for latex and nitrile gloves due to the vinyl gloves disruption in 2016/17.

Overall, it expects global supply for rubber gloves to grow by 15% in 2019.

According to PublicInvest, an aggressive expansion plan by Thailand's largest glove maker Sri Trang will negatively impact Malaysian glove makers.

Sri Trang has expanded to a total production capacity of 21.1 billion pieces, and should arrive at 23 billion pieces as at the end of 2019, with a target to achieve 30 billion pieces by end-2020.

The Thai manufacturer has a higher product mix of latex gloves, which will have a stronger impact on Top Glove compared to nitrile-heavy players like Hartalega and Kossan

Sri Trang has also been cutting its average selling price to gain market share, putting pressure on its rivals.

PublicInvest said Hartalega might see margin compression in the coming quarters due to its premium pricing.

"We downgrade our rating on Hartalega and Top Glove to Underperform while Kossan is maintained at Neutral," it said.

Source: The Star

https://www.thestar.com.my/business/bus ... J5ZJ2v5.99
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Re: Rubber Product Manufacturers

Postby winston » Wed Jun 12, 2019 5:05 pm

Rubber Gloves – Malaysia

1Q19 Report Card: Mixed Bag Of Results; Firmer Earnings In Sight

1Q19 reporting season saw glove producers’ earnings coming in within expectations.

ASPs took a hit from heightened competition as earnings contracted 12.7% qoq.

However, we think the sector has bottomed out with demand catching up with slowing
supply growth, limiting downside risk.

With this, coupled with firming sector prospects and organic demand, 2020 offers decent sector earnings growth of 10.8%.

Upgrade the sector to MARKET WEIGHT from UNDERWEIGHT.

Top pick: Kossan.

https://research.uobkayhian.com/content ... 241111623e
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Re: Rubber Product Manufacturers

Postby winston » Thu Jun 13, 2019 7:10 am

Affin Hwang remains positive on rubber gloves for 2H2019

KUALA LUMPUR: Recent earnings results show that companies in the rubber glove sector are not at significant risk of lower margins from rising production costs, says Affin Hwang Capital research.

The research house maintained its overweight call on the sector with Kossan and Supermax as its top picks.

It kept its buy call on Top Glove despite cuttings its earnings forecast and has a sell call on Hartalega due to its rich valuation and forecast lower growth rate.

In 1Q19, sector earnings contracted 4.3% but still came broadly in line or about 22% of Affin Hwang's and consensus full-year forecasts.

The research house said the profit decline was due mainly to a 22% year-on-year decline in profits in Hartalega due to its margins being negatively impacted by the volatility in the ringgit.

Kossan, however, delivered profit growth of 32% y-o-y during the quarter.

Affin Hwang expects overcapacity concerns to ease as its recent channel checks suggest that lead times have normalised to about 45 days from the 30 days earlier this year.

"We have, however, revised lower our capacity growth forecast for 2019 to 13% from 10%, as some manufacturers have partially delayed their targeted expansion plans for
the year," it said.

It added that the weakening of the ringgit versus the US dollar from 4.06 to 4.19 in the past two months will have a positive effect on rubber manufacturers' margins to the lagging effect of their pricing.

"Based on our estimates, for every 1% change in the RM/US$, the impact to the bottom line is around 0.3-0.5%," said Affin Hwang.

Meanwhile, raw material prices are also on the downtrend with nitrile prices trending lower to US$1,050/,t from US$1,145/mt since the start of the year.

Source: The Star

https://www.thestar.com.my/business/bus ... 6qERdDZ.99
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