Rubber Products (Gloves, Condoms etc)

[winston]

Rubber Gloves
No surge in glove demand yet

WHO has recently confirmed a new virus outbreak in Wuhan, China, which is a coronavirus. Sars is also a type of coronavirus virus.

Our channel checks reveal that glove makers have yet to witness a surge in demand, as the virus is new and mainly in China at this juncture.

Maintain sector Overweight. Top Glove and Kossan are our sector top picks.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... B986295F73

[winston]

not vested

Rubber Gloves – Malaysia
New Coronavirus Sparks Loftier But Justified Valuations

The coronavirus outbreak has well catalysed sentiment on the glove sector.

However, taking into account previous epidemic outbreaks and our base assumptions, valuations appear to have fairly priced in the incremental demand impact on sector earnings.

We lift our 2020-21 sector net profit forecasts by 16% and 11% to factor in our higher volume growth assumptions.

We raise our valuations to reflect the enhanced earnings growth going forward.

Maintain MARKET WEIGHT. Top pick: Kossan.

Source: UOBKH

https://research.uobkayhian.com/content ... 7a00f7abac

[winston]

Covid-19 concerns to drive glove demand

WHO said that as of 9 Mar 2020 there were a total of 105,586 confirmed cases of the coronavirus (Covid-19) globally, resulting in 3,584 deaths.

Glovemakers should benefit from the higher demand for gloves as Covid-19 spreads to more countries and the operating environment stays favourable.

Maintain Overweight, with Top Glove and Kossan as our top picks.

Source: UOBKH

https://rfs.cgs-cimb.com/api/download?f ... 9F42AB8D08

[winston]

More upside for rubber glove sector

KUALA LUMPUR: There remain positive catalysts for the rubber glove sector even as sustained demand for rubber gloves continues to exceed expectations, says Affin Hwang Capital research.

The research house maintained its overweight rating on the sector while revising its 2020 earnings growth forecast higher to 21.5% from 15.6%.

Top Glove and Kossan are its top "buy" picks in the sector, raising their respective target prices to RM8.70 and RM7.70.

The research house said rubber glove manufacturers have locked in sales until the end of 2020, which outperformed its assumption that demand would normalise by 3Q20.

Owing to this, Affin Hwang suggests there is high possibility that manufacuters will further increase the selling price by another 5% to 8% for 4Q20.

Meanwhile, the low price environment could also benefit rubber glove producers as its key raw material, rubber, has a positive correlation to the price movement to oil prices.

"Given the recent decrease in oil prices by 80% since the beginning of the year, we are expecting lower rubber prices for the next few months," it said.

For rubber glove manufacturers, the cost of rubber for both latex and nitrile is 40% to 45% of the cost of goods sold.

The weakening ringgit also serves as a positive catalyst for the sector as nearly 100% of rubber glove sales are in US dollar. Affin Hwang expects demand for PPE-like glove to continue as the vaccine for Covid-19 is still being developed.

Source: The Star

https://www.thestar.com.my/business/bus ... r#cxrecs_s

[winston]

Rubber Gloves – Malaysia
Better Visibility On Sector ASPs

We maintain OVERWEIGHT on the sector as valuations have yet to fully factor in an impending and sustained earnings rush in 2H20.

The sector possesses many levers of earnings surprises, with higher-margin ad hoc sales, rising ASPs and low nitrile cost.

We assume scaling up manufacturing capacity to achieve global herd immunity from COVID-19 could take 12 months.

This underlines our expectation of demand being sustained in 2021. Top pick: Top Glove.

Source: UOBKH

https://research.uobkayhian.com/content ... 87d4e23a1c

[winston]

Glove rush jolted by tighter financing — is the selldown temporary?

by Adam Aziz

KUALA LUMPUR (June 3): Glove manufacturers woke up to heavy selldown with their share prices bashed down by more than 20% to intra-day lows as stock brokerages have tightened margin financing after the meteoric rise.

The steep sell-off at the glove makers this week marked a break from the three-month rally in the sector.

Shares of glove makers closed in the red, albeit after a late rebound towards the end of the trading day, as more stockbroking houses joined their peers to tighten margin financing for purchase of shares in glove companies.

Four counters, namely Supermax Corp Bhd, Rubberex Corp Bhd, Comfort Gloves Bhd and Careplus Group Bhd, hit limit down.

The change of sentiment prompted investors to take profit after the astronomical jump in share prices since the start of the year, from 100% to up to 1,000% up until Monday.

At least five brokerage houses are known to have tightened the margin financing on glove stocks. They are Maybank Investment Bank Bhd, RHB Investment Bank Bhd, AmInvestment Bank Bhd, CGS-CIMB Securities Sdn Bhd and UOB Kay Hian Securities (M) Sdn Bhd.

Tightening of margin financing has drained liquidity away from the glove counters, particularly the smaller-cap stocks.

Top Glove Corp Bhd is the most resilient one. It recouped the most lost ground at the closing bell, settling down 10 sen or 0.68% at RM14.70, having retreated 28.5% earlier today.

Hartalega Holdings Bhd's share price dived as much as 26.2% in the morning session. However, it managed to pare losses to close at RM11.22, down by RM1.52 or nearly 12%.

Likewise, Supermax, which hit limit down, settled at RM7.14, dropping 47 sen or 6.18%. Kossan Rubber Industries Bhd lost 40 sen or 4.55% at RM8.40, having retreated by nearly 22% earlier.

The smaller glove makers were the worse hit, as seen in shares of HLT Global Bhd (down 14.5 sen or 17.27% to 69.5 sen), Comfort Gloves (down 78 sen or 20.8% to RM2.97), Rubberex Corp (M) Bhd (down 87 sen or 22.9% to RM2.93) and Careplus (down 36 sen or 23.23% to RM1.19).

Notably after today’s sell-off, the share price of smaller players like Rubberex and Comfort Gloves have retreated to around the valuation range by some of the brokerage houses.

That said, analysts are bullish that 2021 earnings will catch up to justify the hefty premium valuation.

AmBank Research in its latest note, maintained “overweight” on the sector on expectations of higher sales and wider margins as demand growth triggered by the Covid-19 pandemic is not seen to subside anytime soon.

“We believe that selling prices will continue to soar for the next 12 months as lead time stretches up to 12 months.

“The glove companies’ earnings will be further pushed by expanded margins as raw material prices remain low, average selling prices (ASP) continue to grow, the US dollar continues to strengthen over the ringgit and expansion plans remain intact for the glove producers,” it said.

“Glove makers are now expecting glove demand to increase by roughly 30–50% (8–10% pre-Covid-19). The higher demand has resulted in a shortage of supply, pushing up average selling prices for these medical gloves,” it added.

Interestingly, the rush for glove shares has changed the dynamics to the point where AmBank Research opined that even a stronger ringgit — a bane for glove makers due to its nature as exporting business — will expand margins rather than squeeze it because “unlike pre-Covid-19 times, cost savings are not passed through to customers due to supply constraints”.

Top Glove is now on analysts’ radar, as the projected capacity growth and higher utilisation rate coupled with the market environment factors are seen to boost its earnings by more than 100% in the financial year ending August 2021 (FY21).

AmBank Research valued the group at RM17.38 per share, with a historical price-to-earnings (PE) multiple of around 100 times — but 33 times PE estimates for FY21.

In short, strong demand as a result of Covid-19 pandemic, higher ASP and low raw material prices are expected to continue fueling the glove mania moving forward.

Of 22 analysts covering Top Glove, the counter has a whopping 18 “buy” calls, Hartalega (eight “buy” calls, 28 analysts), Kossan (13 “buy” calls, 18 analysts) and Supermax (eight “buy” calls, 10 analysts).

Source: The Edge

https://www.theedgemarkets.com/article/ ... -temporary

[winston]

not vested

Extraordinary demand uplift

Escalating global COVID-19 cases support demand surge; industry shortage has led to uptrend in pricing

On course for extraordinary profit growth rates as players ramp up utilization rates and lock-in higher margins

Catalysts: earnings surprises, ASPs increases, increased usage leading to “new normal” demand

BUYs: Top Glove, Hartalega, Kossan, Riverstone

Source: DBS

https://researchwise.dbsvresearch.com/R ... =fegdhkiia

[winston]

not vested

Demand for Gloves exceeds supply

by Koon Yew Yin

Any investor will look so stupid if he does not own shares in Top Glove, Hartalega, Supermax, Comfort or Rubberex.

All of them have gone up a few hundred percent in the last 2 months.

The demand for gloves will continue to exceed supply until Covid 19 is under control.

As I said before investors will look so stupid if they did not buy Glove shares. Investors should hold onto their holdings and do not sell prematurely. The game has a long way to go.

Comment: So you would be very stupid if you dont chase the rubber gloves after they have gone up a few hundred percent in 2 months?

https://klse.i3investor.com/blogs/koonyewyinblog/

[winston]

not vested

Too early to ‘sweat’ it

Recent media reports indicate that two of China’s largest glove makers plan to expand their respective production capacity over the next five years.

We are not overly concerned, as China’s new capacity
i) is coming on-stream gradually,
ii) could be delayed, and
iii) has less economical cost base.

Reiterate Overweight, with Top Glove and Supermax as our top picks.

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 665B408F85

[winston]

not vested

MY: MALAYSIA GLOVES SECTOR
A growing pie for all players | POSITIVE

Demand switch to nitrile gloves (from vinyl gloves) is prevalent in the developed markets and we think China could catch-up with this trend in the coming years.

Taking into consideration of the aggressive supply from China, we think industry demand-supply could balance in 2H21, and oversupply risk is likelier in 2022.

In our earnings estimates, we have already assumed for lower ASPs in 2021-22E.

Our top pick remains Top Glove (BUY, TP MYR21.90).

Source: Maybank

https://factsetpdf.maybank-ke.com/PDF/1 ... f83f44.pdf