• The worst rubber glove performer YTD. SUPER MX’s s hare prices tumbled 34% YTD, mainly attributed to selldown in exports stocks following a rebound in Ringgit (vs US$), weaker-than-expected Jan-Mar quarterly results and its prolonged delays in rolling out of its new plants #10 and #11, which capped the upside of its share prices amid weaker earnings visibility vis -à-vis its peers. Management targets to commission these plants by June/July 2016.

• Values emerge. At RM2.15, SUPERMX valuations have turned attractive again with undemanding consensus forward 10.2x FY17 P/E (50% below its peers ’ 21x) and 1.4x P/B (53% dis counts agains t peers ’ 2.9x). We believe such steep valuations have priced in most of the negatives and provided sufficient margin of safety to cushion further sharp share price decline. This is supported by steeply oversold indicators and a rebound in US$.

• Ripe for a relief rally. Normally, selldown on high volume is negative but in this case, since it happened near bottom, could be selling climax with yesterday robust 9.6m shares transacted (284% higher against 1M average and 182% higher than 3M average). Hence, we believe severe downside risks are ebbing, implying imminent rebound in near term.

• A decisive breakout above immediate resistance of RM2.24 (30-h SMA) could take the next leg up towards RM2.33 (100-w SMA) before retesting our LT objective at RM2.56 (10-w & 50-w SMAs). On the flip side, key supports are RM2.06 and RM2.00 psychological levels . Cut loss at RM1.97.

Source: Hong Leong Investment Bank Research - 15 Jun 2016