KL Trader Investment Research Articles

Author: kltrader   |   Latest post: Tue, 19 Jan 2021, 11:05 AM


Top Glove and Supermax: Potential Beneficiaries Amid Coronavirus Outbreak

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China has confirmed human-to-human transmission of the Sars-like coronavirus, and that it has spread to more provinces and other countries in Asia. So far, six people were reported dead while more than 300 people were infected, with worries mounting as millions begin travelling for Chinese New Year celebrations.

While demand has yet to surge, Macquarie Equities Research (MQ Research) believes this will likely prompt glove distributors to start stocking up; Top Glove and Supermax are likely to be the biggest beneficiaries in terms of sales volume.


  • China has confirmed human-to-human transmission of the coronavirus, and the virus has spread to more China provinces and other countries in Asia. While rubber glove manufacturers have not yet experienced a surge in orders, MQ Research believes the worsening situation in China could lead to higher overall glove demand.


  • China has confirmed human-to-human transmission of coronavirus. The virus has spread from Wuhan to Beijing, Shanghai and Shenzhen, as well as other countries in Asia (currently one case in Japan, two in Thailand and one in Korea). Experts indicate the ability of the virus to spread and adapt to the population is similar to the way Sars developed in its early stage and has evoked memories of the outbreak of Sars – also a coronavirus – that killed nearly 700 people in 2003 after originating in China.
  • What was demand during the H1N1 virus outbreak? During the H1N1 outbreak in 2009, glove manufacturers experienced a peak utilisation rate of 90–95%. As a result, overall glove export volume jumped 14% YoY in 2010 along with the surge in overall global demand for rubber gloves.

  • Demand yet to surge, but this could happen anytime soon. MQ Research’s checks show glove manufacturers have not yet seen a surge in glove demand on the back of the virus outbreak. MQ Research believes Chinese buyers have increased demand of cheaper vinyl gloves in the first instance. If the outbreak is prolonged, there could be a spill over to rubber gloves. The upcoming travel period around the Lunar New Year holiday could spark an acceleration of the outbreak and spur global glove demand.
  • Who will be the biggest beneficiary? Glove manufacturers are running close to an optimal utilisation rate of 85%. Thus, any spike in demand could tilt the pricing power back to the manufacturers. MQ Research believes manufacturers with the highest exposure to the Asia market and with the highest capacity additions could be the biggest beneficiaries in terms of sales volume from this virus outbreak. Among glove manufacturers, Top Glove has the highest capacity additions, while Supermax and Sri Trang have strong exposure to the Asia market.


  • Of MQ Research’s covered stocks, MQ Research prefers Top Glove over Hartalega due to its wider product mix, diversified market exposure as well as the potential benefit it could see from this virus outbreak. Nonetheless, Hartalega could also benefit if customers in developed countries (Europe and United States) start stocking up on rubber gloves as a preventive measure. MQ Research’s blue-sky valuations for Top Glove and Hartalega are RM7.50 and RM7.10, respectively.

Source: Macquarie Research - 22 Jan 2020

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jiunn Top Glove and Supermax? or Top Glove and Harta? So misleading ....
22/01/2020 9:35 AM
ahbah Just buy lah.
23/01/2020 1:47 PM

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