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freetospeak

Author: freetospeak   |   Latest post: Tue, 20 Oct 2020, 9:18 AM

 

SUPERMAX - OBM - X !!! REVALUATION IMMINENT !!!

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CiA.CONSORTIUM of INDEPENDANT ANALYST

@free@prob@wok@chief@dynasty@yfhew1 

OBM -X

Supermax chose a business model of differentiation by positioning itself as an OBM provider instead of OEM. With this, their investment over the past 20 years has been focused on establishing the delivery efficiency, distribution, and marketing. All this with the aim of establishing brand loyalty and value. Their brand equity would be synonymous to Louis Vuitton rather than Tesco.

With Covid. Supermax is able to be streamlined to OBM-X :
 
1.Xtra Customer base.
Supermax had captured many new and direct customers (eg.major government bodies and agency) into their database due to covid. These customers once captured will be long term customer in future as Supermax will not lose out in terms of service and pricing (who can win OBM interms of pricing. Not even china cheap gloves.) So for those who keep worrying about new supply coming online should not worry about supermax. Sometime its not only about pricing , Service and Quality of product is of extreme importance. Likewise for other premium n innovative glove product from malaysia.
No point for being able to produce good gloves if one is unable to bring it to the market. Because they can eXcel bringing their produce to the market and the right market that can pay for the value.Hence, they have gained more customers than others.
 
2.Xtra Margin.
No brainer . Removal of middle man , agent and Big distributorhad completely overhauled the margin of Supermax which permanently increase by 20-30% more. This increase is permanent and even the ASP were to drop bak to precovid price (not likely due to reasons stated in our previous article : VACCINE OR WITHOUT = GLOVE STOCK RALLY!!!).
Super will be able to command a very high net profit margin compared to precovid. No longer is the sub 10% margin like in precovid.
Their brand equity and ability to market this to the correct market which allows them to command a better margin than others. In other words, their customers are also willing to pay higher for it with satisfaction.
 
 
3.Xpanded Network.
Due to this Covid. Supermax have aggresively expanded into new distribution line such as more PPE like mask,hand sanitizer, sanitary wipes and towels,faceshield,gown, cost,hair net etc. The collaboration with Shapeshifter for worldwide distribution of BEYONDMASK and Canada Government Mask Contract to be annouced later. Korea distribution is expanding as well. We believe they might acquire some of the largest distributor to become their subsidiary. Aquisition of established distribution network is more economical with a lot of potential.
 
Their contact lens had also improved by leaps n bound due to better publicity , advertising funding and network.
Don't be surprise in 2-3 yrs time, it will bring us the most explosive growth which other glove company doesn't enjoy.
Their knowhow and experience is an enabler for them to expand and reaching into new market segments faster than the others.
 
 
4. Xplosive Profit.
Needless to say. with pt 1 to 3 coupled with agressive capacity expansion equals explosive profit.This permanent upgrade is unprecedented. Unlike previous outbreak. It is not going back to precovid OBM margin and old customer base which is controlled and squeezed by many middle man and big established distributor. 
 
Here is a post covid scenario projection: (based on 48.4 million Caps @ 85% unitisialtion rate by end of 2022)
 
 
 
 
 
From the above conservative scenario projection. Super will still able to sustain high profit even it fall back to Precovid pricing with the OBM-X model.
 
The ascension from OBM to OBM-X should warrant a revaluation of Supermax since it is a structural and permanent upgrade.
 
The only weak point in supermax is capacity. Now with explosive margin and profit. Supermax have planned to double their capacity (highest % increase compared to peers) to 48.4 bil by 2022. Ranking after Topglove and on par with HARTA .

Actually this is not a weak point on secoond thought. In fact even with lesser capacity, they already fare far better than Harta and Kossan. It is which business model/strategy they wish to position themselves in and how will they have executed it. In this case, Super is A+ with OBM model.

 

With OBM-X and 48.4 bil caps by 2022. The effect would be at least a 100 bil capacity in size. Remember Super is earning same profit as 100 bil capacity like Topglove while with only 48 bil COGS. ROE will be very attractive in that sense.

Every RM Supermax makes now and reinvested on capacity expansion, would generate 2-3 times more RM than PEERs. Market has not yet to realise this explosive growth potential of Supermax. This is the hidden power of OBM -X margin.

REVALUATION

 
Current Market Caps
 
SUPERMAX  RM 21.40   = 29 BIL
HARTALEGA RM17.20   =  59BIL
TOPGLOVE  RM 28.00   =  76 BIL
 
To fetch a higher market cap comparable to Topglove(39% now) and Harta(48% now),supermax need

1. Comparable proftabilty and margin to Topglove , Harta.(70% to 90%of their current profit)

Supermax latest QTR is 400m VS Harta 220M (182% )
Supermax latest QTR is 400m VS TopGlove 348 m (115%)
 
With the latest result. Super already met and exceeded the (70% to 90%) benchmark.

2. Comparable dividend payout policy.

This one a bit lacking.but with better profitabilty it shld improve. But with the coming 45-1 share dividend  and possible cash dividend in coming bumper quarter. Dividend policy should improve nevertheless.

3. Comparable liquidity.

SUPERMAX latet Bonus will increase it to 2.6 bil share from 1.3 bil. Comparable to Harta (3b) and Topglove (2.6b pre Bonus)

4. Comparable size and production capacity.

Super will close up the gap with Harta and Kossan in 2022 with plan to double expansion to 48.4 bil.
Expanding in caps turn aggressive after bumper qtr and years of obm network expansion.


5. Better appreciation of OBM-X advantage.

We see more attention and value appreciation in progress now.
All skepticism will be crushed with bumper profit of 800m - 1bil coming profit in QTR 1. Calculation here
 
 
Being an index stock in the abovementioned indexes will command a higher PE and support from major local and foreign fund.
a) FTSE Bursa hijrah shariah index - Indexed on  30th Juneyes
b) MSCI Global Index - To be indexed on 31stst Augyes
c) KLCT index -Condition has been met and believe end of year will be indexed. enlightened
 
We believe Supermax market caps with its leading peers will be closing and be on par as the abovementioned pointers being accomplished. Potentially reaching a 50 to 60 bilcaps as compared to HARTA 59 bil  and TG 76bil as of current valuation.
 
The Consortium of Independent Analyst wish to express here is that there is more future to Supermax for the coming quarters due to its OBM advantage which allows them for dynamic pricing  and super margin capitalised in early period.

 

Appendix:

BEYONDFIT and BEYOND MASK https://www.facebook.com/AureliaGlovesCanada/


https://www.youtube.com/watch?v=WqwAh9Ta3rA

 
 
 
 
AVEO KOREA stocking up here:
 

 
 

 


Disclaimer…This is not an advice to buy or sell. It is just for education and sharing purpose.

CiA do not take accountability for any trading occurring from our information disseminated.

 
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Labels: SUPERMX

Related Stocks

Chart Stock Name Last Change Volume 
SUPERMX 9.27 -0.20 (2.11%) 25,721,600 

  122 people like this.
 
zzzz52 A thousand appreciation to Freetospeak and CIA for contributing their time and effort to bring us this in depth analysis of Supermax. It will be a matter of time before investors realized the value of their biz model.

GLTA.
21/08/2020 9:06 PM
boonlim98 Good job sifu and CIA team
21/08/2020 9:07 PM
inPeace Good job. tq
21/08/2020 9:09 PM
Targeted Clap! Clap! Clap!
21/08/2020 9:18 PM
kktrade Great artical. Thank you!
21/08/2020 9:21 PM
andrew2020 Sifu freetospeak, well done!!!
21/08/2020 9:30 PM
flyingtomoon2020 @Freetospeak sifu, well done and thank you!!!
21/08/2020 9:33 PM
Munger Thank you
21/08/2020 9:42 PM
kltower like
21/08/2020 9:44 PM
terrylam84 IB Analyst busy compiling info here...
21/08/2020 9:52 PM
Vairocana9999 Sifu, a very comprehensive and excellent review. Thank you very much for compiling and sharing. 辛苦你和CiA成员了!
21/08/2020 10:01 PM
max super good job
21/08/2020 10:02 PM
JohnFarmer458 Well written informative article for current investors and potential investors
21/08/2020 10:05 PM
New1530 Thanks
21/08/2020 10:09 PM
vanness_lyh Superb analysis from @freetospeak, It makes me feel more clear about the capacity of Supermx compared with others, and the post-covid scenario is just superb, we hope it comes true in future, thank you.
21/08/2020 10:13 PM
Yahoo128 @freetospeak, much obliged for your great sharing. Supermx has a very fabulous biz model into the future. Will hold tight tight into the future too.
21/08/2020 10:26 PM
Thks1956 Crazy analysis from cia as usual. Now we need to buy more and cannot sell. Sob sob...
21/08/2020 10:36 PM
Mustovoi @Freetospeak..Thank you...
Must read during price correction.!!
21/08/2020 10:41 PM
Goldberg Net margin of 38% - the new normal for SUPERMAX post COVID - eye popping and jaw dropping margins - Yes, you reap what you sow some 12-15 years ago by founder DSST.
The OBM-X business model- from factory to end user = SUPER profit margin.
Supermax is a truly world class company. The pride of Malaysia.

Another excellent analysis brought to you by CIA-Freetospeak consortium.
21/08/2020 10:46 PM
2721 Too bad no money to sapu anymore to enjoy the explosive return in future..
21/08/2020 11:06 PM
cbmytrading This is super amazing analysis and informative article,i will benefit a lot from it...thank you so much sifu free and cia...really appreciate!
21/08/2020 11:08 PM
cbpenbrush Thanks Freetospeak and your fantastic team. This write up or analysis should be treated as the best and most reliable guidelines for us to invest in Supermx !
21/08/2020 11:29 PM
notleaving Thanks for the hardwork. Really appreciated.
21/08/2020 11:53 PM
UncleHuat61 thank you for taking the time and effort in writing this analysis, appreciate it !!
22/08/2020 1:15 AM
mcsuper Fantastic analysis
22/08/2020 1:15 AM
troy88 Another solid piece. Thanks Freetospeak.
22/08/2020 2:40 AM
Power1 Very good, like like like.... Thanks sifu
22/08/2020 5:23 AM
just_investor Like. Very informative. Thank you freetospeak & team
22/08/2020 7:10 AM
see2sea Good write up CiA! Like!
22/08/2020 9:16 AM
freetospeak Hav to like myself...lol..kudos to all CiA agents...cannot do without team work.
22/08/2020 9:25 AM
JIMSENG thanks
22/08/2020 11:14 AM
invest200 Thank you sifu free and the CiA. Excellent work! You provide valuable guidance to general public. This should be a reference to IB analysts as well.
22/08/2020 12:12 PM
probability To me what is interesting in this presentation of Post Covid scenario is..

at OEM margin of 12% used by free on above derivations, Top Glove with say an additional throughput of 40% (capacity expansion by 2022), will be having an EPS of around 40 cents per annum only (before Bonus issue)..

Even with PE 80, Top Glove TP = RM 32 (before bonus issue)

.......


It shows how conservatively the above TP for supermax had been derived..
22/08/2020 9:38 PM
probability and for Top Glove to expand capacity by 40% , it needs to spend almost double the capital Super needs for expanding to 48b by 2022
22/08/2020 9:45 PM
freetospeak Sifu prob r u trying to count the post covid scenwrio for tg?
22/08/2020 10:09 PM
probability yes sifu free.....is my judgement above valid?
22/08/2020 10:12 PM
freetospeak Sifu prob...got number to c clearer.if not hard to comprehend for layman.
22/08/2020 10:17 PM
probability ok let me try...may be tomorrow i post here if i could put in an easily understandable manner...

for now we can see below for TG:

https://klse.i3investor.com/servlets/stk/fin/7113.jsp

on second qtr of 2020, at 9% PAT margin, its EPS was 4.52

I try to see the effects of increasing margin to 12% and then raise sales by 40%....i got roughly 40 cents EPS only...

This is of course assuming TG maintains 100% at OEM sales price

A good place to check these on the Analyst Briefing of Supermax dated 9th Aug page 13 (the first 2 bar giving data for pre-covid ASP)
22/08/2020 10:24 PM
probability sorry sifu free, using your posting basis, with OEM having 1/3 of the OBM margin, TG will be deriving 1/3 of the above profit.

As such, extrapolated for its capacity expansion by 40%, its EPS will be 80 cents per annum (before bonus issue).

Its TP will be double the below value estimated earlier



Posted by probability > Aug 22, 2020 9:38 PM | Report Abuse X

To me what is interesting in this presentation of Post Covid scenario is..

at OEM margin of 12% used by free on above derivations, Top Glove with say an additional throughput of 40% (capacity expansion by 2022), will be having an EPS of around 40 cents per annum only (before Bonus issue)..

Even with PE 80, Top Glove TP = RM 32 (before bonus issue)

.......


It shows how conservatively the above TP for supermax had been derived..
22/08/2020 10:56 PM
JBond007 So happy to see this article.
Freetospeak you really are our Top Gun.
22/08/2020 11:02 PM
freetospeak Thanks sifu prob...appreciate your input...
23/08/2020 7:06 AM
pjseow Thank you freetospeak for your write up. I agree that Supermx should be reevaluated and accorded a higher PE on par with Topglove amd Harta with its OBM distribution channels which had proven to reap the benefits .The last.qtr result with 43% margin showed that supermx OBM model plus marketing restructuring with higher allocation to OBM and cutting off agents and middlemen yield a more superior margins than the other top 3 glove makers.
23/08/2020 7:31 AM
pjseow Thank you freetospeak for your write up. I agree that Supermx should be reevaluated and accorded a higher PE on par with Topglove amd Harta with its OBM distribution channels which had proven to reap the benefits .The last.qtr result with 43% margin showed that supermx OBM model plus marketing restructuring with higher allocation to OBM and cutting off agents and middlemen yield a more superior margins than the other top 3 glove makers.
23/08/2020 7:33 AM
newnewbie Tq Sifus for sharing
23/08/2020 12:47 PM
FutureGains ex after buy
23/08/2020 12:49 PM
GiantPanda I have just read the third time.

Insightful analysis! Great sharing!!

This is WHY you must own SUPERMX !!!
23/08/2020 1:33 PM
probability At current risk free interest rate of 1.8% and further interest rate cut before end of the year, and the fact that all other businesses will remain depressed until the pandemic is over (2 -3 years time)....you really cant see the interest rate direction reversing again for many years to come....

As such, its possible for Gloves stock like Super to deserve a PE of 40...after all its going to beat Harta's margin edge consistently going forward
23/08/2020 1:43 PM
pjseow Probability, based on Supermx Q4 2020 result analyst briefing, we can actually estimate the earnings of Q1,Q2,Q3 and Q4 2021.The informations from.slide 4, 9 ,13 and 14 provides pricing ,leadtimes and orders .These info enable us to estimate the increasing earnings of the next 4 qtrs.I estimated the earnings of next 4 qtrs of.approximately 620 million,775 million, 978 million and 1114 million respectively. Total earning for 2021 is 3.5 billion. My assumption is no capacity increase and no cost increase. Strictly based on ASP increase and monthly volume of 2 billion pcs.This translates into rm 2.57 per share.With just a PE of 15, the tgt price is rm 38.6 if we base on FY 2021 earning.
23/08/2020 2:59 PM
probability noted pjseow, i have seen you messages earlier on how delayed they are at realizing these ASPs...due to lead time

thanks for your usual deep analysis

Posted by pjseow > Aug 23, 2020 2:59 PM | Report Abuse

Probability, based on Supermx Q4 2020 result analyst briefing, we can actually estimate the earnings of Q1,Q2,Q3 and Q4 2021.The informations from.slide 4, 9 ,13 and 14 provides pricing ,leadtimes and orders .These info enable us to estimate the increasing earnings of the next 4 qtrs.I estimated the earnings of next 4 qtrs of.approximately 620 million,775 million, 978 million and 1114 million respectively. Total earning for 2021 is 3.5 billion. My assumption is no capacity increase and no cost increase. Strictly based on ASP increase and monthly volume of 2 billion pcs.This translates into rm 2.57 per share.With just a PE of 15, the tgt price is rm 38.6 if we base on FY 2021 earning.
23/08/2020 3:11 PM
secret2win Very good sharing and valueable
23/08/2020 6:27 PM


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