Author: gloveharicut   |   Latest post: Wed, 12 Aug 2020, 9:25 PM


CIMB upgrade Supermax to RM12.80

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I am reproducing the CIMB report to my blog.


Stock code: *Supermax Corporation  – SUCB MK*
Recommendation: *Add* - maintained
TP: *RM12.80 - 25x CY21 P/E - +1.5 s.d from its 5-year historical mean from RM9.80 previously*

*Key highlights*:

• Our recent meeting with SUCB yielded positives, mainly on higher ASPs recorded and increased allocation for spot orders to 20% of total capacity from previous forecast of 12.5%.

• On the back of the strong global glove demand owing to the Covid-19 outbreak, SUCB estimates that its orderbook visibility will remain high to up to 2HCY21 (1HFY6/22) and it has collected deposits with the bulk of orders for delivery up to Mar-Apr 2021 (4QFY6/21)

• In 4QFY6/20, we gather that ASPs are higher by 30-35% qoq vs our previous forecast of 22%.

• SUCB is able to record higher ASPs vs. its peers given its manufacturing-cum-distribution business model (constitute 95% contribution) and only 5% OEM orders to keep the business relationship with certain customers.

• For its 4QFY6/20 results to be released by mid-Aug 20, we expect SUCB to post a record-breaking net profit of RM320m-350m (>100% yoy and qoq). In our forecast, we are inputting earnings to peak up at 2QFY21, before earnings declining on a qoq basis from 3QFY20 onward. Hence, any further increase in ASPs on a qoq basis beyond 2QFY21 would provide upside to our earnings forecast.  

• Reiterate Add, with a higher TP of RM12.80, 25x CY21 P/E (+1.5 s.d from its 5-year historical mean)


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