Rubber Products (Gloves, Condoms etc)

[winston]

Shares in glove makers slide on looming gas price hike

by Tan Xue Ying

Source: The Edge

http://www.theedgemarkets.com/article/s ... price-hike

[winston]

Rubber Gloves – Malaysia

3Q17 Report Card: A Mixed Bag Of Results

The recent 3Q17 reporting period was respectable with sector earnings up 17% qoq.

This was backed by pent-up demand and improved margins. Also, forward orders are robust and we expect a decent 4Q17.

That said, we advocate investors top slice and buy back at lower levels; valuations have run ahead of fundamentals following the recent rally (surged 51% ytd).

Maintain MARKET WEIGHT and Hartalega is our sole SELL call as it continues to be overpriced.

Source: UOBKH

https://research.uobkayhian.com/content ... 006658015e

[winston]

Top three glove makers advance on bright prospects

by Surin Murugiah

AmInvestment Bank Research's Joshua Ng said the sector's prospects are bright, underpinned by the expanding healthcare sector globally, both public and private, as well as the rising hygiene standards across industries that drive the demand for gloves over the long term.

Ng said the Malaysian Rubber Glove Manufacturers Association projects the global glove demand to grow by 8% to 10% per annum in the coming years.

Combined production capacity of the "Big Three" will expand by a whopping 17% to 121 billion pieces annually in 2018 versus a 7.5% growth in 2017.

Ng said his top pick for the sector is Kossan, with a fair value of RM7.51.

"We like Kossan:-
(1) its strength in R&D which translates to product innovation
(2) its investments in automation which boost efficiency and cut reliance on foreign labour and (3) earnings buffer from a non-glove business, i.e. technical rubber products," he

Source: The Edge

http://www.theedgemarkets.com/article/t ... -prospects

[winston]

Malaysia Gloves Sector

Paradigm shift

by Yen Ling Lee

The sector has further re-rated in 2018 YTD and at a weighted average 12M forward PER of 33x, it is a new high.

That said, we think current valuation could stay in 2H18 supported by the sector’s above-market earnings growth prospect.

We now benchmark glove stocks against the sector’s 12M forward PER on our unchanged 2019 EPS forecasts.

We upgrade Top Glove to BUY (from HOLD) as we believe its strong earnings growth, rising EBITDA margin and ROE, and bonus issue would propel further re-rating.

Source: Kim Eng

https://factsetpdf.maybank-ke.com/PDF/9 ... c559f1.pdf

[winston]

Malaysia: Glove makers

In the rubber glove sector, possible winners (but receiving only minimal spillover benefits) are Top Glove, Hartalega, and Kossan.

About 25%-50% of their sales are fueled by the North American region.

However, consumers are mostly nitrile glove users (the trio produces this) while vinyl gloves were targeted for import tariffs instead.

On a larger scale, the risk-reward profiles for these stocks are unfavourable as valuations are stretched at more than two standard deviation above their five-year mean PE.

Source: The Star

[winston]

Lofty valuations to cap upside for rubber products sector, says HLIB Research

KUALA LUMPUR (July 24): Hong Leong IB Research has maintained its “Neutral” rating on the Rubber Products sector and said an imbalance in supply demand is expected to manifest in 2019 with the glove players expected to increase supply by circa 14% (annual global demand growth of 8%-10%).

In a 2H18 sector outlook today, the research house said the ringgit is expected to be weaker in 2H18 which augurs well for the sector, whilst the reversal to the Sales and Service Tax (SST) regime will yield a neutral effect.

“We expect the glove players will apply for and receive an exemption for SST.

“We maintain our Neutral sector rating. We downgrade Karex to a Sell given the recent share price run,” it said.

Source: The Edge

[winston]

Rubber glove makers expect RM18.8b revenue in 2018

PETALING JAYA: Malaysia's rubber glove industry expects to generate RM18.8 billion in revenue this year, up from RM16.2 billion in 2017, due to robust global demand, says the Malaysian Rubber Glove Manufacturers Association (Margma).

President Denis Low Jau Foo said global demand for rubber gloves continued to rise and was anticipated to increase to 268 billion pieces this year from 232.2 billion in 2017.

“Malaysia is expected to supply 63 per cent or 168.8 billion gloves which will translate into a projected revenue of RM18.8 billion in 2018,” he told reporters here on Thursday in an update of the rubber glove industry and the upcoming 9th International Rubber Glove Conference and Exhibition.

Source: Bernama

https://www.thestar.com.my/business/bus ... DmloM10.99

[winston]

not vested

Rubber Gloves – Malaysia

2Q18 Report Card: A Commendable Showing

2Q18 was a fairly good quarter for the rubber gloves sector with it ending with one earnings beat and two hits.

Sector core profit rose 30% qoq on positive ASP revisions coupled with an increase in sales volumes.

Despite the decent showing, our tactical bear call on the sector is intact, seeing that glove players are already priced to perfection and hence, vulnerable to any negative developments.

Maintain UNDERWEIGHT

Source: UOBKH

https://research.uobkayhian.com/content ... 94779d02e2

[winston]

Glove players' profit margin to remain stable, says MIDF Research

by Syahirah Syed Jaafar

Natural gas constitutes only about 10%-12% of the total production costs for the glove producers under our coverage.

Source: The Edge

http://www.theedgemarkets.com/article/g ... f-research

[winston]

Top Glove, Hartalega, Kossan slump as UOB Kay Hian underweights sector

by Joseph Chin

Risk-reward profile is skewed towards the downside with valuations stretched, with the sector trading beyond +two standard deviations of its five-year forward mean price-to-earnings (PE).

“Expectations of a weakening US$ lent to the recent weakness. Our calculations show that every 1% depreciation of the ringgit vs the US dollar could beef up glove makers’ earnings by 6% (this analysis excludes the shared cost savings mechanism with customers which will consequently moderate any significant gain in profit margins).

“Therefore, based on the current exchange rate, there may be some downside to our earnings estimates given that our forex assumption is based on an average of RM4.23/US$ over the next one to two years,” it said.

UOB Kay Hian Research said further worker rights abuse allegations arose over the weekend. Australian firm, Ansell, was said to be investigating abuse allegations from its Malaysian suppliers.

This is a recurring theme, which initially arose in mid-November 2018. However, it was well addressed by Malaysia Human Resource Minister, M. Kulasegaran, who reiterated confidence in Top Glove's operations’ adherence to the relevant laws.

“Surfacing guidance from rubber glove companies on supply-demand imbalance. This has been well factored in by the market, seeing that rubber glove companies have been guiding on their capacity outlooks for the next two years in detail.

“While the first signs of slowing demand emerged in 3Q18, there seems to be a disconnect between the supply-demand imbalance and the recent selldown,” UOB Kay Hian Research said.

Source: The Star

https://www.thestar.com.my/business/bus ... fLuT3YJ.99