I have written more than 10 buy recommendations for Supermax. Despite my frequent buy recommendations, its share price has been dropping from Rm 11.89 on 6 August 2020 to close at Rm 7.11 today. It has dropped Rm 4.78 or 40% as shown on the chart below. It shows Supermax is on a down trend due largely to short sellers and JP Morgan’s downgraded all glove stocks. Fortunately, JP Morgan did not mention Supermax.
Due to Covid 19 pandemic the demand for glove far exceeds supply and all the glove makers can easily increase their selling prices to make more and more profit.
Currently US has the most Covid 19 cases in the world. It has a total of 23.37 million cases and 389,621 deaths. These 2 figures are still surging as shown on the charts below.
USA is the biggest market for our Malaysian gloves and Supermax has its own sale outlets in most major cities in America.
Supermax reported its 1st quarter ending Sept EPS 30.58 sen. Its previous EPS was only 15.18 sen. It made 100% more profit than its previous quarter. Supermax’s 2nd quarter should be another record profit which will be announced in the next few days.
If I assumed it cannot increase its selling price for its gloves for the whole financial year. To be very safe, if I assumed it cannot increase its selling price for the whole financial year, its annual profit will be 4 X 30.58 sen = Rm 1.22. Based on PE 10, it should deserve Rm 12.20 per share.
Among all the share selection criteria such as NTA, cash flow, dividend yield, debts etc, the most powerful catalyst to push the price up higher is profit growth prospect. Supermax has the best profit growth rate among all the glove stocks.
The truth will set me free. I believe eventually the fundamental analysis for share selection will prevail.
