Supermax

Supermax

Postby winston » Tue Jun 17, 2014 6:01 am

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CIMB Research views glove maker Supermax as undervalued

KUALA LUMPUR: CIMB Equities Research views glove maker Supermax as undervalued and is retaining its target price of RM2.90, which is 24.3% above the last traded price of RM2.33.

It said on Wednesday Supermax’s fundamentals remain intact with strong demand and resilient selling prices.

“The company is facing capacity constraints and the bulk of its earnings growth this year hinges on whether the company can get its plants up and running as soon as possible.

We maintain our FY14-16 EPS forecasts and target price, based on 12.4 times CY15 price-to-earnings (P/E) which is at a 30% discount to Hartalega’s P/E. Our Add rating is retained. High utilisation rate of its new capacity is a key potential catalyst,” it said.

CIMB Research said Supermax’s presentation during the Invest Malaysia conference drew close to 50 fund managers and analysts. The presentation focused on the competitiveness of the industry.

Due to the influx of nitrile capacity, Supermax is of the view that maintaining reasonable selling prices is of the utmost importance in remaining competitive in the industry.

Passing on cost is not as easy as before. Higher operating cost in the country has narrowed the competitive gap between Malaysia and the countries nearby, especially China, which are also going into the nitrile business aggressively.

The research house said nonetheless, the demand for its products continues to be strong with little downward pricing pressure. Given its high utilisation rate, the company does not see issues in filling up the new capacity this year. Its new plants, Lots 6058 and 6059 are on track for completion in September-October 2014. Supermax will have a total capacity of about 23 billion gloves by year-end.

“Supermax’s price resilience comes from its reasonable pricing and strong own brand manufacturing network, which is lacking in its peers. Given its long oversold position of more than 60 days, we believe that its new capacity from Lots 6058-59 will be filled.

“While we believe that 1H14 may be slow due to capacity constraints, 4Q should be stronger as new capacity comes on stream. Supermax is trading at only 10 times CY15 P/E, which is at a 25% discount to the sector average. At this level, we believe that its share price has factored in its foreseeable risks. About 70% of its sales are generated from own brand manufacturing which we believe commands some brand value,” said CIMB Research.

Source: The Star
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Re: Supermax

Postby winston » Sat Aug 02, 2014 5:01 am

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Supermax to maintain production base in M'sia despite challenges
Jun 10, 2014

KUALA LUMPUR: Medical gloves manufacturer Supermax Corp Bhd said it would maintain its base in Malaysia despite the rising challenges in operating business here.

"We are here to stay and will not move out our production facilities (from Malaysia)," said executive chairman and group managing director Datuk Seri Stanley Thai.

This is despite the fact that it is bracing for a lower margin amid cut-throat competition from rivals in Thailand and China, as well as rising costs of doing business locally.

Despite still retaining leadership in the industry, Malaysian gloves makers lost 4-5% market share to their peers in Thailand and China in terms of exports to the United States in the first quarter of this year, Thai said.

He made the remarks to reporters on the sidelines of Invest Malaysia 2014 on Tuesday.

Part of the reasons for the market share loss was due to market players, including Supermax, which chose to pass on the higher business costs to the customers.

That came in the wake of the scrapping of fuel subsidy, the implementation of minimum wage, as well as adjustments in electricity tariffs early this year, Thai added.

To maintain its global competitiveness, Supermax has to brace for a lower margin of 9-11% going forward, or risk losing its market share to rivals, he said.

"Gone were the days that we have a margin as high as 15-20%," he said.

Thai urged the authorities to come up with relevant measures to offer a more conducive environment for local manufacturers to operate in.

To counter the rising costs, the maker has embarked on automation processes for production lines, and is in the midst of looking for alternative energy sources.

Source: Bernama
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Re: Supermax

Postby winston » Sat Aug 02, 2014 5:33 am

Supermax sees price war BY NG BEI SHAN
Jun 1, 2013

PETALING JAYA: Supermax Corp Bhd foresees a price war in the glove manufacturing sector in the second half of the year, due to heightening production efficiency and capacity among industry players, which will eventually squeeze margins.

Group managing director Datuk Seri Stanley Thai said average selling prices (ASP) for rubber gloves would be trending downwards due to intensified competition in the market, especially for nitrile gloves.

“We expect profit margins for nitrile gloves to be between 9% and 11% eventually, as all the glove manufacturers have increased their production capacity, hence increasing supply,” he said at a press conference after the company AGM yesterday.

Thai said its overall production capacity would increase from 17.8 billon pieces of gloves currently to 23 billion pieces at year-end. Of the total, 53% would be nitrile gloves and 47% natural rubber gloves.

While he expects profit margins to be squeezed, he was optimistic of registering earnings growth on the back of its enhanced capacity.

In a note to investors, Kenanga Research said a hike in ASP was expected in the second quarter.

Thai, however, refuted higher ASP on the back of stiffer competition, thus resulting in lower ASP.

An analyst said: “It could be their strategy to gain market share by having attractive ASP, but that said, they might have to absorb part of the costs.”

Another analyst pointed out that Supermax’s profit margins for its first quarter ended March 31 had been affected due to the mininum wage policy, effective since Jan 1, as labour costs rose by some 30% to 50%.

“From the glove makers’ latest quarterly results, we can see that some of the players were less affected because they had been able to pass on the cost to their customers, or that their operating cost had been mitigated by better automation processes,” the analyst said.

Thai disclosed that its major automation was expected to be completed by next year and that machinery upgrading efforts were ongoing.

Affin Investment Bank has downgraded the counter from a “buy” to an “add”, with a lower target price due to lower earnings per share (EPS) forecasts.

“We are also revising upward our effective tax rate assumption to 16% from 14%, as management has clarified that the group is close to having fully utilised its reinvestment allowance claims.

“As a result, our financial year ending Dec 31, 2013 to 2015 EPS forecast has been slashed by 10% to 12% to 20.7 sen, 23.2 sen and 26.3 sen, respectively,” the research house said.

Supermax group accountant Andrew Lim said only one of its units could use the reinvestment allowance, going forward.

According to Kenanga Research, the glove maker’s first-quarter net profit rose marginally due to lower effective tax rates, mainly due to the reinvestment allowance claimed by some of its subsidiary companies.

An analyst said its effective tax rate would increase without the reinvestment allowance, thus putting pressure on its earnings.

Thai said the Government should look into the reinvestment policy in the country so that Malaysia remained attractive as an investment destination.

Source: The Star
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Re: Supermax

Postby winston » Mon Feb 15, 2016 9:02 pm

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Affin Hwang ups Supermax to Buy with higher target price

KUALA LUMPUR: Affin Hwang Capital Research has upgraded glove maker Supermax Corp to a Buy with a higher target price of RM3.40.

It said on Monday Supermax’s share price fell 14% year-to-date as sentiment turned against gloves stocks.

“We think that the correction was overdone, and value has emerged at this juncture. Supermax is trading at 13 times price-to-earnings (PE) FY16, at a significant discount to the sector average of 20 times,” it said.

Given the better earnings visibility, the huge discount should be unwarranted and the research house added there was room for it to narrow.

Affin Hwang raised its earnings forecasts by 10.9% for FY16 and 9.5% for FY17 (1.4% for CY15).

This was based on:
(i) higher installed capacity from plants 10 & 11;
(ii) higher US dollar assumption at RM3.95 vs RM3.50 earlier; and
(iii) better operational efficiencies from newer lines.

“We also raise our target price to RM3.40 at 16 timesPE FY16 (from 12 times), and a 10% discount to the long-term KLCI average of 18x. Upgrade to Buy on valuations,” it said.

Affin Hwang said Supermax is scheduled to release its 4QCY15 results in the last week of February.

It was expecting a strong set of results due to higher installed capacity as the two long-delayed new rubber gloves plants (Plants 10 & 11) in Klang have finally been commissioned.

“We understand that eight double-former lines are currently in operation with an installed capacity of approximately 2.2 billion pieces per annum catering for nitrile gloves. Separately, the remaining 12 lines, which have additional capacity of 3.3 billion pieces per annum, are slated for full commissioning by 1HCY16.

“The development is positive as Supermax has been a laggard for most of 2014/15 as poor execution of its expansion plans has put a dampener on investor sentiment.

“Supermax has been trading at depressed valuations and a steep discount to the sector average throughout 2015 due to the many delays and uncertainties. We believe that the commissioning of Plant 10 & 11 will provide a positive boost to earnings growth and its stock performance,” said the research house.

Source: The Star
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Re: Supermax

Postby winston » Mon Feb 15, 2016 9:02 pm

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Affin Hwang ups Supermax to Buy with higher target price

KUALA LUMPUR: Affin Hwang Capital Research has upgraded glove maker Supermax Corp to a Buy with a higher target price of RM3.40.

It said on Monday Supermax’s share price fell 14% year-to-date as sentiment turned against gloves stocks.

“We think that the correction was overdone, and value has emerged at this juncture. Supermax is trading at 13 times price-to-earnings (PE) FY16, at a significant discount to the sector average of 20 times,” it said.

Given the better earnings visibility, the huge discount should be unwarranted and the research house added there was room for it to narrow.

Affin Hwang raised its earnings forecasts by 10.9% for FY16 and 9.5% for FY17 (1.4% for CY15).

This was based on:
(i) higher installed capacity from plants 10 & 11;
(ii) higher US dollar assumption at RM3.95 vs RM3.50 earlier; and
(iii) better operational efficiencies from newer lines.

“We also raise our target price to RM3.40 at 16 timesPE FY16 (from 12 times), and a 10% discount to the long-term KLCI average of 18x. Upgrade to Buy on valuations,” it said.

Affin Hwang said Supermax is scheduled to release its 4QCY15 results in the last week of February.

It was expecting a strong set of results due to higher installed capacity as the two long-delayed new rubber gloves plants (Plants 10 & 11) in Klang have finally been commissioned.

“We understand that eight double-former lines are currently in operation with an installed capacity of approximately 2.2 billion pieces per annum catering for nitrile gloves. Separately, the remaining 12 lines, which have additional capacity of 3.3 billion pieces per annum, are slated for full commissioning by 1HCY16.

“The development is positive as Supermax has been a laggard for most of 2014/15 as poor execution of its expansion plans has put a dampener on investor sentiment.

“Supermax has been trading at depressed valuations and a steep discount to the sector average throughout 2015 due to the many delays and uncertainties. We believe that the commissioning of Plant 10 & 11 will provide a positive boost to earnings growth and its stock performance,” said the research house.

Source: The Star
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Re: Supermax

Postby winston » Mon Jul 25, 2016 6:24 pm

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Proving the skeptics wrong

We estimate 4QFY16 was a flattish quarter owing to ongoing revamp works on older lines and a less favourable operating environment.

As Plant 10 and 11 are expected to be fully commissioned by 1QFY17, we believe the group will post robust earnings growth of 14.4% yoy in FY17.

Neutral on contact lenses business; project minimal contribution in the near term.

Re-rating catalysts include consistent earnings delivery and better earnings visibility.

Our target P/E multiple is lowered to 12x, cutting our target price to RM2.70.

Source: CIMB

https://brokingrfs.cimb.com/3_3AvG8r2aC ... HUdPg2.pdf
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Re: Supermax

Postby winston » Mon Nov 27, 2017 8:34 am

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Negative surprise from Supermax, CIMB Research downgrades to Hold

KUALA LUMPUR: CIMB Equities Research has downgraded glove maker Supermax Corporation Bhd from Add to Hold, following the negative surprise about the conviction of managing director Datuk Seri Stanley Thai for insider trading.

The research house said it had lowered the 12-month target price from RM2.46 to RM2.03 which is 12 times CY19 price-to-earnings. Its last traded price was RM2.09.

“Although we still are of the view that the company’s prospects are improving while it should deliver strong earnings ahead, this negative surprise will weigh down on Supermax’s share price and create a share price overhang in the medium term.

“Downside risk: significant loss of orders due to reputational impact; upside risk: successful appeal of the conviction,” it said.

On Friday, the Securities Commission announced that Thai was found guilty of insider trading by the Kuala Lumpur Sessions Court. This was with regard to communication of non-public information between Oct 25 and 29, 2007 about APL Industries Bhd (APLI).

He was sentenced to a five-year jail term and fined RM5mil; this is the first time a custodial sentence for insider trading has been handed out.

At this juncture, a stay of execution has been granted while a filing of appeal is accepted.

CIMB Research said this scenario was not inputted in its expectations. Although the insider trading charges are not related to Supermax directly, it pointed out Thai is a key management personnel as executive director and group managing director.

“However, we believe the stock has largely priced in this issue as Supermax has traded at an average discount of 21.1% to its peers since he was charged in court with this offence on Dec 15, 2014.

“Supermax has, so far, not announced any potential changes to its management team post the conviction. Nevertheless, Supermax has said that it is confident the remaining members of its management team are more than capable to oversee the group’s global operations with no major changes.

“We gather that members of the group’s management team are all well experienced in Supermax’s business and most of them have been with the company for more than 20 years.

“Although we are of the view that Supermax’s business operations should remain unscathed, we have concerns regarding reputational risks on the stock.

“We believe that investors will be apprehensive in investing in Supermax at this juncture with the current negative newsflow. However, we do not expect a massive de-rating on the stock as its CY18 P/E is currently already trading at a 44% discount to the sector’s average of 24.2 times. Still, we widen the discount to 50% (from 40%) to the Malaysia glove sector’s average to reflect these risks,” it said.

Source: The Star

https://www.thestar.com.my/business/bus ... s-to-hold/
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Re: Supermax

Postby winston » Wed Nov 29, 2017 3:51 pm

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Aug 30, 2017

Supermax Corporation Berhad TP: RM1.80 (-0.6%)


4QFY17: Dragged by Higher Effective Tax Rates

YoY (3QCY15-2QCY16 vs. 3QCY16-2QCY17), despite revenue increasing by 3.2% to RM1,126.6mn, PBT declined by 32.2% to RM110.4mn.

We believe the poor performance was due to disruptions to production and overall efficiency arising from upgrading and maintenance works to older plants during 2016 as well as pre-operating and marketing costs incurred for the expansion of the contact lens division.


Outlook

Progress with major capacity expansion at the group’s glove division remains cloudy. Recall that the group has two major capacity expansion projects in the pipeline, namely the Glove City in Klang (31.7bn gloves/annum) and Supermax Business Park in Serendah (15.5bn gloves/annum).

Combined, these projects are expected to more than triple current capacity which we estimate at ~21bn gloves/annum and correspondingly fuel the group’s growth trajectory.

Construction of the first phases were initially scheduled to commence around 2014/2015.
Yet to date, meaningful contributions to the group’s financials are not evident.


Valuation

Our TP for Supermax is maintained at RM1.80/share, pegged to an unchanged PE multiple of 11.0x. Capacity driven growth in subsequent quarters and visibility of positive progress from expansion of both the gloves and contact lens division would be re-rating catalysts for the stock.
Reiterate Sell.


Source: TA Securities
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Re: Supermax

Postby winston » Thu Jan 18, 2018 8:33 am

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SUPERMAX CORP BHD

Buy (upgraded from hold)
Target price: RM3.10

The board had appointed Tan Chee Keong (Stanley’s nephew) and Cecile Jaclyn Thai (Stanley’s daughter) as executive directors to help ease concerns over the company’s succession planning.

AffinHwang Capital believes that the concerns have been priced into the current share price, and the result of the appeal is not likely to have further negative impact on the share price.

“Despite the concerns surrounding Supermax’s management team, we believe that it is business as usual for the company.

Supermax, like its peers, will likely continue to benefit from the vinyl glove supply disruption in China, which should help drive its earnings growth for 2018,” it said.

The research house has raised its 2018 to 2020 earnings by 8% to 11% to factor in the better growth prospects.

“However, the consensus view is less optimistic on Supermax’s outlook, as the company’s annualised net profit based on the first quarter of 2018 is 10% higher than the consensus forecast; in our view, successful delivery of earnings growth would be the key re-rating catalyst for the stock in the near term.”

AffinHwang Capital has raised the company’s target price to RM3.10 (previously RM2.10) based on a higher multiple of 17.8 times 2018 price-to-earnings ratio (PER).

“Even at this higher target multiple, we believe that there is upside potential, as the stock would be trading at a 39% discount to the current sector forward PER of 29 times.

“Supermax has traded at a 16% discount to the sector since 2010.

“The biggest downside risk to our investment thesis would be even weaker-than-expected demand for gloves, longer time lag on passing through the higher production cost to its customers,” it said.

Source: AffinHwang Capital
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Re: Supermax

Postby winston » Tue Feb 20, 2018 3:42 pm

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SUPERMAX CORPORATION BHD

Rating: Hold
Target Price: RM2.35 (raised)

SUPERMAX’S first half FY18’s revenue rose by 28.1% year-on-year (y-o-y), mainly driven higher sales volume.

CIMB Research said the group managed to ramp up capacity from Plants 10 and 11 to capitalise on the current strong global demand for gloves.

It also noted that the first half earnings before interest and taxes margins improved 5.5% points y-o-y to 15.8% which it attributed to better economies of scale.

“Overall, first half’s net profit came in above ours and consensus expectations at 66% and 62%, respectively,” it said.

It noted that the stronger performance was mainly due to higher sales volume, decline in natural rubber prices (-10.9% quarter on quarter) and better cost efficiencies, especially as contribution from its new production lines increased due to higher automation.

CIMB Research attributed the higher sales volumes in the first half, particularly in the second quarter, to all the remaining six lines in Plant 10 and 11 being commissioned gradually in the period.

It also said that the group is in the midst of revamping some of its older plants which would increase overall efficiency as well as production output.

Most of these works are expected to be completed with commercial production to begin gradually from the first quarter of FY19.

“Given the stronger-than-expected second quarter results, we raise our FY18-20 forecasted earnings per share by 12.4%-19.0%. This is to mainly account for: higher utilisation rate leading to an increase in production volume, higher operating efficiency and lower raw material prices,” it said.

It maintained its hold rating, with higher target price of RM2.35.

“In tandem with our earnings per share increases, our target price is raised to RM2.35, still based on an unchanged 12 times calendar year 2019’s forecasted price to earnings ratio (which is a 50% discount to the glove sector),” it said.

Source: CIMB
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