Trying to Make Sense Bursa Investments
Supermax: Can We Derive Revenue for the Quarter? Rubber Glove Exports Up 9.4% Q-o-Q, 260% Y-o-Y
Today Hartalega announced its quarterly results for 4Q FY2021. While the financial year results came above consensus estimates (RM2.9 billion vs RM2.5 billion Bloomberg consensus), many felt this quarter's results were rather underwhelming. The reasons for this are probably a topic for an entirely different post that I may never write as I don't like writing negativities about companies, especially not so when it might be largely undeserved. However, Hartalega's report might have given us an opportunity for an early peak at what results Supermax might report. According to rumours, Supermax is expected to announce its quarterly results for the quarter ended 31 March 2021 tomorrow.
Also today, the Department of Statistics released the detailed version of the March 2021 External Trade Statistics. I reported on the brief version of the report when it was released last week here. According to the detailed version, the value of rubber glove exports from Malaysia for the month of March was RM6.395 billion - significantly above an assumption I have made earlier of RM5.9 billion to RM6 billion. That is 9.4% higher than the figure recorded in February, and 260% higher than the export figure for the first month of the pandemic - March 2020.
As Top Glove, Kossan, and Hartalega have already released their quarterly reports, I did a bit of calculating. Some adjustments were needed, because Top Glove's financial quarters end 1 month before the quarters of the other 3 big glove manufacturers in Malaysia. In my calculations I divided the glove exporters in 6 groups: Top Glove, Hartalega, Kossan, Supermax, Second Liners (including Comfort Glove + Careplus + Rubberex), Others.
Based on their financial results, the breakdown of contribution to the national exports by player/group is the following:
| Company/Group | Q3 CY2020 | Q4 CY2020 | Q1 CY2021 |
| Top Glove | 36.74% | 36.70% | 33%* |
| Hartalega | 13.52% | 15.76% | 12.83% |
| Kossan | 9.51% | 8.94% | 11.68% |
| Supermax | 13.59% | 14.79% | n/a |
| Second Liners | 4.85%** | 4.34%** | n/a |
| Others | 21.79% | 19.48% | n/a |
*Top Glove's results are adjusted and potentially known only for the first two months of Q1 CY2021.
**Comfort Glove's results are adjusted as their financial quarters are one month behind the calendar quarters.
The exports of rubber gloves during Q1 CY 2021 were RM5.68 billion in January, RM5.845 billion in February, and RM6.395 billion in March. A total of RM17.92 billion for the quarter.
Based on the above, let's calculate a few scenarios:
Scenario 1: Excellent quarter for Supermax
Assuming that the contribution of the Second Liners and Others will continue to decrease quarter on quarter:
- The contribution of the Second Liners to the total exports for the quarter might be approximately 4%;
- The contribution of Others to the total exports for the quarter might be approximately 19%.
Thus, Supermax will contribute 19.5% of the total value of exports for the quarter. That would make RM3.5 billion revenue from sales of rubber gloves for the quarter.
Scenario 2: Good quarter for Supermax
Assuming the Second Liners and Others will perform in approximately the same way as in the last two quarters:
- The contribution of the Second Liners to the total exports for the quarter might be approximately 4.6%;
- The contribution of Others to the total exports for the quarter might be approximately 20.5%.
With these assumptions in mind, we can calculate that Supermax's contribution might come at approximately 17.4% of the total value of exports for the quarter. That would make RM3.12 billion revenue from sales of rubber gloves for the quarter.
Scenario 3: Average quarter for Supermax
Assuming the Second Liners and Others will perform better than in the last two quarters:
- The contribution of the Second Liners to the total exports for the quarter might be approximately 5%;
- The contribution of Others to the total exports for the quarter might be approximately 23%.
With these assumptions in mind, we can calculate that Supermax's contribution might come at approximately 14.5% of the total value of exports for the quarter. That would make RM2.6 billion revenue from sales of rubber gloves for the quarter.
A quick reminder that last quarter Supermax reported revenue of RM2 billion, and PAT of RM1.07 billion (net profit margin = 53%).
Important disclaimer: Any views expressed are for informational and discussion purposes only. None of this information is intended as, and must not be understood as, a source of advice. It is imperative that you always do your own research and that you make any decisions based on your personal situation and your own personal understanding.
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3 people like this. Showing 27 of 27 comments
treack, thank you for your comment.
Harta released their investor presentation. According to the slides, their sales volume for the quarter was 6.7 billion pieces. That makes ASP of RM343 ($83) for the quarter. Last quarter their ASP was RM224 ($55). That's an increase of 50% q-o-q.
2021-05-04 20:29
I will top up TG on retracement. Hopefully there is a chance for that. Glove counters price movement is so irrational now. Even crazier that Bursa de casino
2021-05-04 20:53
https://www.malaymail.com/news/malaysia/2021/05/02/report-ismail-sabri-rejects-news-report-of-possible-mco-3.0-says-nsc-yet-to/1971083
this guy is penipu BESAR! Yesterday say no MCO, today say got MCO.
PENIPU BESAR!
2021-05-04 20:53
LimitUp, speakup, thank you for your comments.
speakup, as the healthcare system in certain states is currently flooded and running at close to 100% capacity, I don't think anything other than a tightening of restrictions is possible to be honest. The real question is how much tightening will be imposed, and if that amount of tightening will have the needed effect. Based on today's announcement, I am not too optimistic.
2021-05-04 23:20
Ben Tan Thanks for compiling the glove export data . I think the most likely scenario is scenario 2 . I estimate the PAT margin to be 58 % . With this margin ,the supermx earning may hit 3.12 x 0.58 = 1.81 billion.
2021-05-05 06:16
@Ben Tan, another excellent piece of write up. For long term investors (Buy and Hold) I do not think there is a better sector to put money in especially for the amount of dividends that glove makers are giving out (except the 2nd liners).
2021-05-05 06:48
pjseow, Brutus, thank you for your comments.
pjseow, yes, it does seem like scenario 2 is the "average" case. My assumption for net profit margin would be a bit lower though. This is probably a good time to mention that before yesterday my estimate for Supermax's quarterly results was significantly lower based on previous guidance by the company. However, with Harta's "lukewarm" results and the exports figures showing a significant increase m-o-m and q-o-q, it is hard to explain the difference in any other way. The second liners don't have the capacity to cover a big part of the gap.
Brutus, I don't like to talk bad about companies, so I have not been writing much about the second liners. They are 3 very different businesses, and while some will likely do better than others in the future, my personal expectation is that (most of) the big boys will do best overall.
2021-05-05 10:11
Posted by pjseow > May 5, 2021 6:16 AM | Report Abuse
Ben Tan Thanks for compiling the glove export data . I think the most likely scenario is scenario 2 . I estimate the PAT margin to be 58 % . With this margin ,the supermx earning may hit 3.12 x 0.58 = 1.81 billion.
Rm1.81B????????? 80% higher than last Q?????????????
2021-05-05 10:22
Ben Tan , Harta "lukewarm" result was hit by the unexpected 6.7 billion shipment which was way below its previous qtr 9.5 billions. This unexpected drop was due to shutdown arising from preventivr measures on covid infections plus shortage of containers. Despite such drastic lower shipment, Harta can still produce a qoq improvements which was attributed to the 50% increase in ASP.
2021-05-05 12:36
CharlesT, trueinvestor, pjseow, thank you for your comments.
pjseow, we are running a bit off-topic (I may indeed write that article on Harta), but just to confirm - elsewhere I wrote about this, and about the fact that their inventories have increased by almost RM300 million q-o-q. That was not my point when I pointed to the lukewarm quarter. My point was that based on my simple model explained in this article, as Harta reported lower than expected revenue from sales, and as exports of gloves have increased by more than expected, the gap (i.e. the difference in these expectations) must have come from somewhere, and the most likely "culprit" would be Supermax.
2021-05-05 12:43
Charles T, the estimation is purely mathematical by using Ben 's scenario 2 3.12 b revenue and my estimate of 58 % margin . The previous qtr margin already hit 53 % margin. Hence, with 50 % ASP increase , 58 % assumption is considered conservative.
2021-05-05 12:43
Like it or not, hv to accept the fact that ASP oredi peaked n very likely to go down or oredi came down
2021-05-05 17:26
Kyou, batman666, Jack Khan, CharlesT, abang_misai, Foker, thank you for your comments.
Please note that this was just a simplistic model, which evidently proved ineffective in this case. Note that there are two adjustments that might need to be made:
- Supermax donated RM75 million worth of gloves to the Malaysian government, which cannot be captured by the model and is unpredictable.
- Even in the "worst" case described in my post, and when factoring in the donation, there is still approximately RM10 billion in exports that is unexplained. There might have been enormous items coming from newly commissioned lines of newcomers, for instance, or there could have been a blowout month of March for Top Glove.
Either case, the difference is very significant and we will have to wait for more announcements in the coming months to see where it might have come from.
2021-05-05 22:53
But now everybody knows that ASP oredi peaked few months ago n will drop further fm now on
2021-05-06 08:50
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treack
Thanks for the insight Mr Tan.
In the Harta Quarterly Report, they did mention that their ASPs are still on the rise, and the underwhelming revenue is due to shipping container shortage- and yet, their revenue still increased. My question is, is there a way we can derive the ASP increase percentage for this quarter juxtaposing the data from Department of Statistics
2021-05-04 20:05