CEO Morning Brief

Glove Counters Among Bursa's Most Active on Monday Amid Profit Turnarounds

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Publish date: Tue, 21 Nov 2023, 08:46 AM
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TheEdge CEO Morning Brief

KUALA LUMPUR (Nov 20): Glove stocks emerged among the most actively traded counters on Bursa Malaysia on Monday (Nov 20), following the profit turnarounds seen at two of the Big Four glove counters, namely Hartalega Holdings Bhd and Kossan Rubber Industries Bhd, in the July to September quarter.

Leading the pack was Top Glove Corp Bhd, which saw over 79 million shares traded and was ranked the third most actively traded counter of the day. The group's share price, which hit an intra-day high of 82 sen earlier as it climbed over 4%, closed at 80 sen, still up 1.91%, with a market capitalisation of RM6.52 billion.

Also on the top 50 actively traded list were Supermax Corp Bhd, Careplus Group Bhd and Kossan. Supermax shares finished at 96 sen, up 5.59% or five sen with 27.29 million shares done, while Careplus closed up half a sen or 1.75% to 29 sen after 17.49 million shares were traded.

Kossan settled two sen higher at RM1.60 after 12.13 million shares changed hands; the stock has climbed 26 sen or 19.4% this month. Hartalega closed five sen or 2.13% higher at RM2.40, with 7.90 million shares traded.

Kossan announced last week that it made a net profit of RM40.97 million for its third quarter ended Sept 30, 2023 (3QFY2023), after two consecutive loss-making quarters when net loss totalled RM27.55 million. Its 3QFY2023 net profit was also 76.14% higher than the RM23.26 million it made in 3QFY2022 — despite revenue dropping 28% to RM403.48 million from RM560.52 million — thanks to better cost controls and lower raw material costs in its glove business, as well as the sale of higher margin infrastructure products at its technical rubber products division.

Hartalega, meanwhile, reported earlier this month a net profit of RM27.7 million for its second quarter ended Sept 30, 2023 (2QFY2024), after registering three consecutive quarters of losses, with a net loss of RM52.47 million recorded in the immediate preceding quarter of 1QFY2024. Revenue grew 2.7% to RM452.09 million from 1QFY2024's RM440.04 million.

Analysts covering Kossan lifted its target price (TP) after the glove maker beat expectations to swing to profit in its quarterly earnings, on better sales volume amid customers' inventory replenishment activities.

However, they also expect persistent pricing competition due to an oversupply in the industry to keep the average selling prices (ASP) for glove makers flattish in the near term.

For Hartalega, most analysts have reiterated their previous calls for the company, despite its better-than-expected quarterly financial results, as they anticipate that the glove maker will still face headwinds for the rest of the year.

They, however, by and large raised their target prices (TPs) for Hartalega. HLIB Research, which kept its "sell" call on the glove maker saying “positives have been priced in”, raised its TP for Hartalega to RM2.08. But it reckoned that Hartalega could still possibly report losses for the next two quarters given the "fluid" situation.

Likewise, Kenanga Research maintained its "market perform" call on Hartalega, and raised its TP to RM2.33 from RM1.85 previously, while noting that Hartalega has demonstrated a more disciplined production capacity cut of 32%, compared with peers at 10-12%. It also forecast Hartalega to make RM42 million in net profit for FY2024 (from a net loss of RM105 million initially), and raised its FY2025 net profit forecast by 92%.

Read also:
Frankly Speaking: Respite for conservative glove makers
Kossan returns to black in 3Q with better cost controls, lower material costs
Hartalega returns to the black in 2Q after three quarters of losses

Source: TheEdge - 21 Nov 2023

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