Review

• Supermax’s posted 9MFY24 net loss of RM47.1mn (vs. our full-year net loss forecasts of RM32.0mn). We consider the results to be within expectations as we expect a stronger 4QFY24 driven by higher demand.

• 3Q24 net loss narrowed to RM0.7mn (vs. net loss of RM44.4mn in 2Q24) despite a slight decline in revenue (-1.7% QoQ). We attribute the recovery to lower operating expenses of 32.0% resulted from higher operational efficiency.

• 9M24 revenue declined by 22.0% to RM466.5mn as glove demand remains weak due to the oversupply situation. Positively, the LBT reduced to RM57.1mn as compared to a LBT of RM173.7mn in 9M23. Note that Supermax has shut down 4 of its old plants over the past 2 years.

Impact

• No change to our earnings projections.

Outlook

• Moving to 4QFY24, we expect sales to increase driven by higher demand as customers are expected to replenish their stocks.

• Separately, Supermax’s overseas manufacturing facility in US is currently in the process of installation of production lines and equipment. We believe the US plant (USD350mn capex for phase 1) would likely commence operations in 4Q24 or in 2025. Note that the group had initially targeted to start production in 4Q22, which was then pushed back to 2Q23.

Valuation

• Reiterate our Buy recommendation with an unchanged TP of RM1.05/share based on 0.6x FY25 P/B.

Source: TA Research - 29 May 2024