Being one of the leading rubber glove producers in Malaysia, SUPERMX has 12 factories manufacturing various types of nitrile latex and natural rubber gloves, which are exported to over 165 countries worldwide i.e. the US, EU, Middle East, Asia and South Pacific countries. The group’s current capacity stands at 26.15bn gloves per annum. Meanwhile, SUPERMX is also running the very first home-grown contact lens manufacturing company in Malaysia.

SUPERMX’s share price had tumbled 73.3% from its all-time high of RM11.60 to a low of RM3.04 before ending at RM3.09 on 9 Aug, weighed down mainly by the shift in market interest from pandemic beneficiaries to recovery stocks and correction in glove average selling price (ASP).

Currently, SUPERMX is trading at undemanding 4.2x FY22 P/E (6% and 73% discount against its peers’ average of 4.47x and 10Y average of 16.1x, respectively), coupled with the global resurgence in Covid-19 cases to spur demand for their products given the threat of exponential infections from more virulent Delta strain.

In addition, with the finding that Covid-19 (like seasonal flu) is more active during winter months, we reckon it is too early to rule out the possibility of Covid -19 case rising in key markets again (as the US, UK and EU started to relax its lockdown rules), which would inevitably increase the demand for disposable gloves and act as a cushion to the falling ASP.

Technically, SUPERMX is grossly oversold and building a sound base near RM3.00 psychological level. Any weaknesses from current prices towards key supports at RM2.94-3.00 levels provide a good opportunity to accumulate. A strong breakout above RM3.48 (50D SMA) will spur price higher to RM3.81-4.06 levels. Cut loss at RM2.84.

Source: Hong Leong Investment Bank Research - 11 Aug 2021