Rubber Products (Gloves, Condoms etc)

[winston]

Opportunity to buy into weakness in glove stocks, says Kenanga Research

by Justin Lim

The research house added that it does not expect ASPs to fall off a cliff in this year despite average lead time being reduced from 300 days in early January 2021 to the still elevated 170 days currently (compared with 20 to 30 days during the pre-Covid-19 period).

The research house's ASP assumption is between US$40 (RM165.70) and US$46 per 1,000 pieces for calendar year 2022 (CY22).

Kenanga Research said its top pick for the sector is Hartalega Holdings Bhd. The research house has an "outperform" rating and target price (TP) of RM17 as the stock is trading at nine times its CY22 earnings per share (EPS) based on an ASP assumption averaging US$46 per 1,000 pieces.

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/561596

[winston]

Construction of rubber glove hub to start in June

To be located in the Gebeng industrial area, the hub will be constructed on a piece of land spanning 128.2 hectares, involving an investment of RM100 million, Pahang State Development Corporation (PKNP) chief executive officer Mohd Faizal Jaafar said.

Source: Bernama

https://www.freemalaysiatoday.com/categ ... -366156373

[winston]

Perak state govt jumps on glove-making bandwagon, to build RM800m glove factory in Batu Gajah

Source: Bernama

https://www.theedgemarkets.com/article/ ... investment

[winston]

U.S. probes two Malaysian glove makers over forced labour allegations -report

Source: Reuters

The United States is investigating Malaysian glove makers Hartalega Holdings and a unit of Supermax Corp over allegations of forced labour, the Edge Weekly reported on Saturday.

Reuters reported on Friday that Canada is also investigating allegations of forced labour in Malaysia’s palm oil and glove manufacturing industries.

Source: Reuters

https://www.reuters.com/article/malaysi ... SL3N2NG01S

[winston]

Glove makers unlikely to be severely impacted by softening prices

By THOMAS HUONG

“Part of the reason Top Glove’s ASPs fell was because of the United States Customs and Border Protection’s (US CBP) withhold release order (WRO) resulting in a fall in sales to the United States. Note that selling prices to the United States are higher than the global average. So, the group had to divert orders away from the United States (to other regions with lower ASPs)”.

The WRO had led to Top Glove diverting orders away from the United States (North America sales volume lower by 68% quarter-on-quarter) to other territories (Latin America, Asia ex-Japan and Eastern Europe sales volumes grew 66%, 19% and 17% respectively).

It noted that Top Glove had recorded a fall of 21% quarter-on-quarter in blended ASPs to US$65 (RM266) per 1, 000 pieces in Q3FY21.

“We predict a drop of US$5 (RM21) in each month for the next quarter, in line with market prices".

UOBKH: “We gather that nitrile glove ASPs are currently trending between US$75 (RM307) to US$70 (RM287) per 1, 000 pieces for June and July 2021. This is slightly ahead of our earlier expectations of ASPs normalising by 3% to 5% month-on-month.”

“The glove business is international and very competitive. In the past 20 or 30 years, 250 glove factories were set up and 80% of them have closed down. The risk is high. It is very difficult to compete with the existing players unless you are extremely good, ” said Wee Chai.

Source: The Star

https://www.thestar.com.my/business/bus ... e=smartech

[winston]

PublicInvest Research downgrades rubber glove sector to 'neutral', cuts earnings forecasts by 10%-35% on lower ASP assumptions

by Tan Siew Mung

Source: theedgemarkets.com

https://www.theedgemarkets.com/article/ ... casts-1035

[winston]

MIDF downgrades glove sector to 'neutral' as peak in urgent demand points to end of supercycle

by Tan Siew Mung

"Among the stocks, we prefer Hartalega for its above-industry profitability and its focus on product differentiation and innovation".

Source: theedgemarkets.com

https://www.theedgemarkets.com/node/573704

[behappyalways]

Fund managers shy away from glove stocks even as analysts keep 'buy' call
https://www.theedgemarkets.com/article/ ... n-buy-call

[winston]

Rubber Gloves
Covid-19 driven tailwinds are subsiding

We downgrade the sector to Neutral from Overweight, due to weaker earnings prospects (declining ASPs and aggressive capacity build-up).

Overall sector valuations (17.1x CY23F P/E vs 5-year historical mean [2015-2019] :19.5x) have largely priced-in the sector’s weaker earnings prospects.

We believe, current sector valuations will be supported by:
i) solid dividend yields
ii) strong balance sheets and
iii) subsiding ESG risks

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... BFAC55BB60

[winston]

Entering a phase of declining
ASP trend

Upcycle seems to have been cut short

The glove sector is entering a phase of declining ASP (and hence profit) trend on increased supply and rising vaccination rates.

Competition is intensifying among both existing and new entrants.

ESG risk adds further pressure on glove companies’ earnings and valuation outlook.

We are switching our valuation method from DCF to PER multiple, and downgrading the sector to Neutral. Hartalega is our preferred pick.

Source: Maybank

https://mkefactsettd.maybank-ke.com/PDFS/225703.pdf