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Author: pBlue   |   Latest post: Sun, 17 Jan 2021, 1:23 PM

 

Topglove. A Response to Choivo Capital: The Greatest Fool.

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What drives the glove bull run?

Answer: The Covid19 pandemic.

It is as simple as that. The virus does not care about human sentiment, or political opinion. The SARS-Cov2 virus is.

 

Why does the glove market have more to run?

Answer: Because there are more humans to infect.

Currently 26 million people have been officially infected. Increase that by a factor of 10 to account for people who are asymptomatic and it is just 260 million people. There are 7800 million people alive and humanity does not have immunity to this virus.

So, do not look at this like an economic bubble with greater fools, look at this as a pandemic with doctors having to contend with a contaminated work environment and hospitals that are flooding with Covid19 patients. It is bad in developing nations because hospitals there are poor and it is bad in developed nations because hospitals are not built to have excessive spare capacity. There are another 7500 million more people to go.

 

How long does it take to make a vaccine?

Vaccines typically take 5-10 years to develop. The fastest vaccine ever developed took 4 years (Mumps). The Ebola vaccine with all the modern technology of the late 2010s took 6 years to develop and test. It applied for FDA approval in December 2019. So when politicians and company CEOs say they will have a vaccine within a year, they are talking BS. Imagine a politician claming that if 1 woman takes 9 months to give birth to a baby, then they will have 9 women working together to give birth to a baby in 1 month. It simply cannot be done. You cannot rush biology, be it a pregnancy,  the immune system or vaccine development.

As it is, vaccine companies are no longer conducting vaccine trials consecutively as they should, rather they are doing all the trials concurrently at the same time. This removes the very reason of why we do the trials in the first place; to test the vaccine candidate and catch any harmful side effect using as few people as possible.

Take Moderna as an example.

Phase1             Start: 16 March 2020              End: 22 November 2021

Phase2             Start: 29 May 2020                  End: March 2021

Phase3             Start: 27 July 2020                  End: 27 October 2022

And moderna is aiming for an aggressive timeline of producing a vaccine by early 2021, aided by a FDA emergency use authorization, a moved incentivised by a $300 million bonus.

In effect, Moderna has not completed its phase I trials yet, but has started its Phase II and III trials.  Moderna's mRNA-1273 vaccine will not have completed any of its trials before Moderna aims to mass produce its vaccine and distribute it via FDA emergency authorization. Perhaps shame and the potential of bad publicity will eventually stop Moderna from becoming the American equivalent of the Gamaleya Institute in Russia with its equally untested but government approved vaccine.

https://clinicaltrials.gov/ct2/results?cond=COVID-19&term=mRNA-1273&cntry=&state=&city=&dist=&Search=Search

 

But... but we make new Influenza vaccines every year! So why can't we make a covid19 vaccine in a year.

Well that is because by 2020 we have nearly 75 years of experience and infrastructure build up to make the influenza vaccine in massive quantities. In addition, we aren't actually making a new vaccine; we are modifying an existing influenza vaccine to compensate for the new mutations. With the SARS-Cov2 virus, we will need to make a new vaccine from scratch and we know very little about this virus as we just discovered it in January 2020.  There are also further complications in vaccine development as the SARS-Cov2 virus is a member of the Coronavirus family which has displayed ADE behaviour (explained later in this article)

 

Are vaccine bad for glove sales?

Nope. Vaccines increase glove sales.

Right now, doctors and nurse only need to see 20% of the people infected by Covid19. That is the 20% of 26 million people so sick that they need to go to the hospital. 80% are mildly ill,  they are sent home and told to stay self-isolated for 14 days.

Now imagine if doctors and nurses needed to see 7800 million people because we have just started a mass vaccination program. Doctors will need more gloves and other PPE. Why? (1) Because they do not want to spread the SARS-Cov2 virus. THe mass vaccination means that suddenly the entire population is going to come into contact with a few health workers. It is almost certain that these health workers will meet an infected person. And if that worker gets infected they will be meeting and thus spreading the SARS-Cov2 virus to a lot of uninfected people. It takes 2 weeks after vaccination is completed before immunity develops. (2) So far all Covid19 vaccines need 2 doses of the vaccine, with the second dose given 2 weeks after the first. Meaning that the doctors will be seeing the same person twice. It also likely means a person remains susceptible to the virus for at least a month after the first dose is given.

And if you prefer history  just looks at TG profits in the 2009 H1N1 pandemic

  • February 2009          TopGlove Profit After Tax (PAT)    37.0 million (Before pandemic)
  • April 2009                 WHO warns of H1N1 influenza
  • August 2009             TopGlove Profit After Tax (PAT)     56.8 million
  • September 2009       FDA approves four influenza vaccines
  • November 2009        TopGlove Profit After Tax (PAT)    65.2 million
  • December 2009         Mass vaccinations in US begins
  • January 2010             Mass vaccinations in Brazil begins
  • February 2010          TopGlove Profit After Tax (PAT)     70.5 million
  • August 2010              WHO declares H1N1 pandemic over
  • August 2010              TopGlove Profit After Tax (PAT)     45.0 million (After pandemic)

Compared to what we have now.

  • November 2019        TopGlove Profit After Tax (PAT)    111.4 million (Before pandemic)
  • January 2020            WHO warns of SARS-Cov2
  • May 2020                  TopGlove Profit After Tax (PAT)     347.9 million

FDA has yet to approve a Covid19 vaccine... and when it does... we would expect a significant jump in glove demand.

 

Taking an untested vaccine candidate, what do you have to lose?

There are 4 different possible outcomes.

  1. The vaccine candidate works. You have immunity to the virus and that immunity is long lived and last more than 1 year.
  2. The vaccine candidate works. You have immunity to the virus but the immunity is short lived and fails within months.
  3. The vaccine candidate fails. No immunity to the virus.
  4. The vaccine candidate fails. Antibody Dependent Enhancement (ADE) occurs. ADE is a situation where the virus is able to use the antibodies that coats it to more efficiency enter and infect cells. Hence people who are vaccinated become even sicker than people who are not vaccinated.

Outcome (1) is what we hope for.

Outcome (2) is useful for high risk medical workers. It can even be used to control flare up of the virus and prevent it from becoming an epidemic. Useful in countries where the virus is mostly under control like China, New Zealand etc.  But alone such a vaccine is insufficient to stop a pandemic.

Outcome (3) is a waste of time, money and resources.

Outcome (4) is what we hope not to happen. ADE is observed in several different families of viruses, and is the reason why we do not have a vaccine against  Lentivirus (eg HIV), Flavivirus (eg Dengue) and Coronavirus (eg. SARS). We have put 10 year of work to develop a vaccine against 2003 SARS with no sucess, and a lot longer against HIV. A failed vaccine candidate with this outcome can make people more suspectible to infection and increase mortality rate, due to increase severity of the infection.

So yes...given SARS-Cov2 is a coronavirus, a member of a familiy that has previously displayed ADE behavior, there is a risk that a poorly design vaccine candidate can go horribly wrong.

 

The Swedish option; Let it go. Let it grow. Don’t care about it anymore.

Before one considers implementing the Swedish option… which is the do nothing and let the virus ravage the population… one has to consider 2 factors.

(1) While the mortality rate of Covid19 is on average ~1%, this is only true if the hospitals are fully functional. 20% of people infected need medical care... as simple as antibiotics to as severe as ICU. When hospitals are pushed to their limit, the mortality rate goes up. Hospitals run of out essentials and common items, drugs, oxygen, even stuff as common as gloves. At its height the mortality rate of Covid19 in Italy was 8%, and people were saying China was hiding the true deaths as it had reported only 3.4% mortality rate.

(2) If we somehow keep the average mortality rate to 1%, this is still 1% of 7800 million people. That means 78 million people dead worldwide. This is more deaths than the 1918 pandemic, more deaths than WW2. In Malaysia, it means 310,000 deaths. And given the exponential growth of the virus, most of the deaths will occur very close together. In New York, there were so many dead people, that the four crematoriums within the city had to run 16 hours a day 6 days a week. Excess bodies had to be buried in mass graves and there were still bodies found rotting in the sun because Covid19 infected bodies could not be processed fast enough. If the idea of bodies roting in the sun is not distrubing, consider this, Sweden has 20x more deaths than its neighbours. It is easier to make a sacrifice if you aren't paying the price.

It is likely a vaccine will not be developed in time to stop the current Covid19 outbreak. However it does not mean we should let the virus spread as it pleases. Such a move will result in an pandemic that will grow exponentially and will almost certainly overwhelm the local healthcare system and crash the global medical supply chain. This will send the average mortality rate soring to levels we have only glimpsed in Italy (~8%). Instead, we must try to constrict the virus's growth as much as we can. We will probably not escape paying Covid19 with the deaths of ~1% of the global population but we may escape paying any higher.

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Labels: TOPGLOV

Related Stocks

Chart Stock Name Last Change Volume 
TOPGLOV 6.34 -0.08 (1.25%) 12,878,100 

  16 people like this.
 
PureBULL ... https://www.malaysiakini.com/news/541488
Meditate on this, the country best pay master loss money in last QR.

There is only 1 industry with certainty of huge increasing QR PAT now n to next 4-6 QR.
Lots of stocks on klse even with big names soon r in high risk sos zone of calling scary RI !
07/09/2020 3:17 AM
abang_misai Haha. Competition from China is ignored
07/09/2020 5:41 AM
calvintaneng Correct

After Petronas suffered huge quarter loss will come many Industrial products company reporting losses due to Mco shutdown

Later Real estate companies will also report losses with new laws taxing unsold houses and condos

And the horror of horrors will follow with Banks showing losses due to loan moratorium and high npl due to many unable to service loans without jobs like airlines, tourism and hotels all reporting negative balance sheets

Tech stocks will also stagnate and come down as well as their p/e is extremely high

Tesla P/E over 200 and Amazon P/E over 100

What then?

The only Sector that will shine and shine and shine with fantastic results will still belong to

Malaysia World Champion Medical Glove Stocks like

Topglove overall world champion

Supermax: growing at Superspeed

Careplus : running faster than a Cheetah

HLT GLOBAL
Triple income streams

1) from Hand glove dipper liner (launching latest Triple Hang Glove dipper liner by end 2020)

2)From HL rubber industries

3) From covid test kit sales world wide

These ones are Chun Chun hitting bull eyes after bull eyes in ever increasing profits for next 5, 6 and 7 quarters

The Medical glove bull market is gathering strength in its Peak Earning Reporting Times

Earnings!

Solid earnings!!

SUPERB EARNINGS!!!

YESSS!!! THE BEST IS YET TO COME!!!

THE GLOVE BULL IS UNSTOPPABLE!!!
07/09/2020 5:51 AM
1234newbie I think this write up is explicit and it is for those who read them only will know and agree towards the severity of the epidemic. We can only hope, medical personnels will definitely use more gloves while attending to patients, be it infectious or not as all patients in private hosp sector is adamant to do covid screening. Rmb.. Its not only limited to covid patients, its to all patients!
07/09/2020 7:26 AM
EatCoconutCanWin All in gloves..?
07/09/2020 7:41 AM
stocktrade101 I think vaccines will be available for public use within the next 6 months since at least 6 are already in Phase 3 trials and so far so good. The question is effectiveness of these vaccines whether the efficacy will last 3,6,12,18 months ppl don't know yet. Also how soon will the vaccines be made available to all those who needed them is a big question too.
07/09/2020 8:33 AM
freetospeak Sifu Pblue well done..very good explanation.
07/09/2020 8:58 AM
SK1008 Sifu Pblue Excellent article.
07/09/2020 9:01 AM
pBlue @abang_misai

China produces 10% of all the gloves in the world.
Malaysia produces 70% of all the gloves in the world.

Malaysian big glove companies have a very long backlog of orders. For Topglove this backlog is now 590 days long, up from 30 day during pre-covid19 days ie demand for gloves is now so great that customers a willing to wait 1.6 years to get their order.

Is China competition? Maybe it will be in a few years. Assuming that the trade war between US and its allies against China will stop.
07/09/2020 9:08 AM
pBlue @stocktrade101
There have been a few problems...

Moderna has NOT finish recruiting volunteers... They have 21,411 volunteer 2 days ago.

Moderna also has found that white people which comprise 76% of their volunteers are affluent enough to stay home or work from home. Since this are not challenge trials, and thus are depending on the vaccinated volunteer going out and exposing themselves to the virus.. this social distancing has become a problem. So much so, Moderna is now actively looking for colored people who tend to work lower down the job ladder and thus are often not allowed to social distance or work from home.
07/09/2020 9:42 AM
GiantPanda Very Good analysis! Thanks for the sharing
07/09/2020 2:40 PM
newbie8080 These days, quite difficult to find companies that can make a guaranteed good profit with guaranteed good profit margin consistently for next 12 mths.
I can only think of glove at this moment.
Don't really bother about the share price movement.
At the end of the day, the company that makes the best profits consistently should be reflected in the share price as well.
07/09/2020 4:27 PM
PotentialGhost All rubbish
07/09/2020 7:07 PM
Vairocana9999 Sufu, well said, thanks for sharing.
07/09/2020 8:14 PM
newbie8080 Why a PPE shortage still plagues America and what we need to do about it

Doctors and nurses are still reusing single use N-95s and experiencing shortages of face shields and gloves. How did this happen in a country ranked No. 1 in pandemic preparedness by the WHO, one which comprises 40% of total global pharma spending, and represents 24% of global economic output?

https://www.cnbc.com/2020/08/22/coronavirus-why-a-ppe-shortage-still-plagues-the-us.html
07/09/2020 8:58 PM
Superbull88 Where China vacine , no promote , stupid , already approved Beijing government , Stupid ppl , must update China vaccine , update US , update rusia , paria stupid, 50 k human trail run in third stage , no side effect , Indonesia , afrika , Europe , China vacine awaiting timing to approved By WHO , expect this coming month December
07/09/2020 9:16 PM
Superbull88 Vacine appear , COVID -19 virus kill , u healthly , Everybody healthly , use gloves for what , use masturbation ,use for melancap,
Everything back to normal , glove demand drop like hell ,asp price will follow drop like hell , share price also drop like hell , kacang putih Calculation
07/09/2020 9:22 PM
DickyMe The author counts the chicken before the eggs hatch. His calculation is a typical Mat Jenin's dream. If X multiply by Y then Z. The what ifs are not taken into consideration. This is an example of an idiot's positive mind.
07/09/2020 9:58 PM
teareader818 Many are touting Top Glove's 560 days backlog. When the pandemic is over it can overnight have 560 days of surplus! Can it happen? Never say never!
07/09/2020 10:18 PM
sensonic COMFORT QUARTERLY RESULT SO GOOD. TOMORROW GORENG ?
07/09/2020 10:41 PM
Zuliana Bombs collecting in progress. OMG
07/09/2020 11:01 PM
Zuliana Mind blowing article... bombs everywhere ?
07/09/2020 11:03 PM
fightingdragons Vaccines are developed as political tools for politicians to peddle hope. Politicians need to demonstrate that they are not only controlling/preventing the spread of the virus, but also actively seeking a cure or permanent solution. What they really hope for is while all this is seen as unprecedented global efforts to find a vaccine solution, the virus will ultimately burn itself away and disappear. Vaccines are mainly a sideshow to show that they are doing something.
08/09/2020 6:41 AM
financesharinghomie seems like choivocapital is right and pBlue is indeed the greatest fool?
08/09/2020 2:00 PM
lextcs most of the gloves makers are now off 50% from their peak. soon top glove and supermax will join in the ranks of falling 50% off their highs. Still have plenty of room to fall
08/09/2020 3:06 PM
limpek i think 1 have to think beyond current situation.Be logic, It is no doubts that current glove supply market remains tight as orders have been stretched to at least next year. But how about in 2022 and there after when every 1 gets vaccinated? can their ASP remain as high as current and earnings still sustain? that remains a question. Currently many players started to venture in glove making, not only china and local players are ramping up production as well. If their current supernormal profit can still sustain beyond 2022 and grow then the current valuation is justifiable, what if it is an opposite? Would u still pay so high PE of 20 or more to buy a company if their growth cannot sustain? It is similar to a company selling its property to make 1 off supernormal extraordinary gain. Would you take in the gain to calculate the value or exclude it becoz it is 1 off item?
08/09/2020 4:06 PM
EatCoconutCanWin now who is the foolish?
08/09/2020 5:38 PM
supersaiyan3 Well written. 100 mark
09/09/2020 10:33 AM
mach10 keep blogging and the share price is still on the decline.what are your points?
09/09/2020 4:37 PM
sensonic SEMUA ORANG PANDAI CAKAP BELI TOP GLOVES TAPI GUA BELI SUDAH RUGI BANYAK. KENAPA ?
09/09/2020 9:15 PM
pBlue This is the 6th time in 9 months that TG has experienced a -20% or greater plunge since the pandemic started in January. The fundamental driver of the glove bull run, Covid19 remains unchanged. There are still 250K new cases of Covid19 a day. Demand for gloves remains high and continuous to climb.

My point on FA means.. that I am buying more TG shares at the bottom of these -20% plunges because I am confident that the share price will recover. And since I don't use margin, only cash, I can wait for the recovery; 3 weeks, next quarter, even next year. I am also very confident TG will be very profitable until at least late 2021, so I will be getting significant dividends from my TG shares while I am waiting for price recovery.

@Sensonic... you only lose if you sell. You must have holding power. You need to be confident in your decision and an understanding of the company and the sector. Think about it this way, you are buying part of a company. Treat it like you are buying a car, or computer.

TG and Supermax are making a boat load of money. More money than they have ever seen. Supermax made RM400million PAT in one quarter! TG made RM350 million PAT in the last quarter and is expected to make even more this quarter, equaling or perhaps beating Maybank. Meanwhile the other sectors of the Malaysian economy aren't doing so well.

So where else would you put your money?

PS: I have experienced six -20% falls in TG. So by this point I am a bit numb to the entire experience. I held steady through 5 plunges, and will continue to hold steady through number 6. And in a few months, there will be another plunge and another after that. The thing about a company with strong fundamental, is that it will always find its feet again and rally.
10/09/2020 2:17 AM
Starlet Bravo ... pBlue
10/09/2020 2:25 AM


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