Supermax’s 1QFY13 results were within  our and  consensus  estimates, making up 23% of both full-year forecasts. The improvement in 1QFY13 numbers  was  due  to  higher  sales  volume  and  production  efficiency. Following an internal reallocation of coverage, we revisited our financial model  and  revised  our  assumptions.  Rolling  over  our  valuations  to FY14, we derive a new FV of MYR2.84, based on a 12x P/E. 
 
-  Within expectations. Supermax (SUCB)’s 1QFY13 results were largely in  line  with  our  and  consensus  earnings  estimates,  making  up  23%  of both  the  annual  forecasts.  The  company  recorded  revenue  of MYR320.5m  (-0.6%  q-o-q;  29.0%  y-o-y),  which  we  attribute  to  higher sales  volume  and  larger  production  capacity.  Correspondingly,  its  net profit improved by 13.6% y-o-y (though dipped slightly by 0.3% q-o-q) to MYR31.8m  on  higher  gloves sales  as  production  capacity expands  and its production lines became more automated and efficient.   

- Expansion  plans  to  drive  future  earnings.  We  gather  from Management  that  SUCB  will  be  focusing  on  expanding  its  production capacity  in  the  nitrile  gloves  segment  through  the  construction  of  two new plants at Lot 6058 and 6059. Nitrile gloves command comparatively higher  margins  and  are  less  subject  to  raw  materials  price  volatility. Once the company’s plants are fully commissioned by 4QFY13, SUCB’s total nitrile production capacity would more than double from the current annual capacity of 5.9bn pieces to 12.3bn pieces.

-  Still  a  BUY.  We  remain  positive  on  SUCB’s  outlook  as  it  continues  to expand  its  production  capacity  in  the  nitrile  glove  segment  as  well  as increasingly  automate  its  production  lines.  Following  an  internal reallocation  of  coverage,  we  revise  our  assumptions  and  arrived  at  a new  MYR2.84  FV,  pegged  to  a  12x  FY14F  P/E.  We  continue  to recommend a BUY on this stock.

Source: RHB