• Laggard against its peers... The rubber glove players are prime beneficiaries given their favourable exposure to the US$ and relatively resilient earnings profile coupled with sustained low raw material prices. However, SUPERMX share prices remained a huge laggard with YTD gains of only 23.8% against its peers ’ average 71.6% s urge. This could be attributed to the group’s repeated delays in rolling out of its new plants #10 and #11, which could adversely affect growth visibility, and consequently capped its share prices upside amid weaker earnings visibility vis-à-vis its peer. Management targets to commission these plants by 2Q16.
• ...and these negatives are likely priced in. At RM2.08, SUPERMX valuations remain undemanding at consensus forward 11.5x P/E (45.8% below its peers’ 21.2x) and 1.44x P/B (64.8% dis counts agains t peers’ 4.1x). We believe such steep valuations have priced in most of the negative and provided sufficient margin of safety and cushion further sharp share price decline, supported by gross ly overs old daily indicators and management’s active share buyback program (SUPERMX bought back about 5.8m shares YTD against 2.1m shares in 2014 and 1m shares in 2013 since Apr).
• Playing catch-up. After tumbling 27.7% from 52-week high of RM2.67 (3 Aug) to a low of RM1.93 (29 Sep), SUPERMX share prices have staged a relief rally along the uptrend channel to end at RM2.08 last Friday (a tad above 200-d SMA of RM2.07).
• We are positive of a resumption of uptrend following its downtrend line breakout (on 30 Sep) and a sustainable closing above 200-d SMA will spur greater upside towards RM2.17 (R1), as both MACD and RSI have turned upwards, signaling buying momentum is picking up. To recap, las t Friday’s 6.5m s hares trans acted was 183% higher against 1M average of 2.3m and 141% higher than 3M average of 2.7m shares. Higher resistances are situated at RM2.30 (50% FR) and RM2.39 (38.2% FR).
• Immediate supports are RM2.00 and RM1.93. Cut loss at RM1.90.

Source: Hong Leong Investment Bank Research - 19 Oct 2015