The  Edge  Financial  Daily  reported  that  two  sources  have  revealed  that Supermax Corp (SUCB) will be diversifying into the contact lens business and that its production line to manufacture contacts lenses will be ready for commissioning by June or July. Recall that in Mar14, SUCB announced that it had incorporated a 98%-owned subsidiary called SuperVision Optimax SB with  the  remaining  2%  stake  belonging  to  Mr.  Ting  Chong  Chai.  It  is understood  that  Mr.  Ting  was  the  head  of  engineering  and  technical development  of  Clearlab  (the  world’s  first  bio-compatible  daily  disposable contact lens manufacturer). (Source: The Edge Financial Daily)

Comments: We are mildly positive on SUCB’s move to diversify its business as this could differentiate the group from the other glove makers and bring in another income stream  which is estimated to have GP margins of up to 60%. We also believe that Supermax’s global distribution platform will help to promote this new product. However, the contact lens business will not be a major source of income and the main core of business will continue to be gloves. We are cautious on the execution of the group’s expansion plans as their  capacity  expansion  plans  have  constantly  been  bogged  down  by delays.

We  maintain  our  HOLD  rating  with  unchanged  TP  of  RM2.11,  pending further updates from management.

Source: Affin Hwang Capital Research - 16 Mar 2015