UOB KAY HIAN SINGAPORE ANALYSIS DATED 17TH JUNE2020

SUPERMAX SUPER STRATEGY TO MAXIMISE PROFIT
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We highlight Supermax as we believeit is by far the best beneficiary of the recent surge in demand for gloves.

1- Supermax with its OBM model could be an underappreciated diamond.

Unlike Hartalega, Top Glove and Kossan which are predominantly OEMs,Supermax has TOILED FOR YEARS to establish its own brand and distribution channels. The benefits are coming to fruition with the surge in ASPs. It currently commands ASPs of close to US$160-175/’000 pieces vs US$150 in May and US$90 pre-COVID period. We gather there is limited upside to current ASPs as various government agencies have implemented redirecting of personal protective equipment (PPE) supplies of close to US$160-175/’000 pieces. That said, Supermax does receive urgent ad hoc orders in the range of US$190/’000 pcs.

2- OBM alongside its own distribution network fully captures elevated ASPs.

Apart from its OBM model, Supermax uniquely distributes its own products as well which makes up close to 55% of overall volume and derives the best margins of up to 700-800% at the gross profit level (based on current prices). Meanwhile, sales through third-party distributors command about 400% margins.
Since the COVID-19 outbreak, Supermax has strived hard to increase its sales exposure through these two channels (to 95% of volume mix from 70% previously) to fully capitalise the disproportionate spike in demand to maximise its earnings. With these established advantages, it allows Supermax to be a far superior beneficiary of elevated ASPs relative to the likes of Top Glove.

3-Most aggressive capacity expansion among Big 4 producers.

Aside from commanding margins in excess of peers, Supermax’s capacity expansion amid the windfall earnings is ahead of peers as well at 21.5% CAGR over 2019-21. Top Glove is close behind at 19.7% while Hartalega’s and Kossan’s capacity expansions are limited as available space has been exhausted. By end-22, Supermax is due to usurp Kossan in terms of capacity. Apart from that, its capacity is dedicated to nitrile production.

4-No change to dividend payout but distribution of treasury shares instead...

Supermax is not looking to increase its dividend payout although it anticipates windfall earnings for the year. However, it is looking to distribute its treasury shares as dividend-in-kind instead. It has 68.9m treasury shares, translating into a 5% yield.

5- Capacity expansion and maintain a robust balance sheet.

Supermax’s addition of close to 20b pieces annually in capacity to its existing capacity of 21.8b pieces over the next 3-4 years would translate to close to RM1b capex. Therefore, to preserve its balance sheet and maintain its net gearing at 0.2x, it necessitates a conservative dividend payout despite the windfall earnings.

6-Higher raw materials costs going forward despite lower underlying prices.

Latex and nitrile costs for Supermax fell 6.6% and 0.1% q-o-q in 4QFY20 respectively. However, going forward, management expects overall raw materials including packaging and chemicals to cost ~10% higher amid lower underlying prices as Supermax looks to trickle down some windfall earnings to its suppliers.

Appears to have well beaten consensus.

Based on Supermax’s ASPs and product mix, it appears Supermax could significantly beat consensus expectations of RM395m and the highest projected earnings of RM561m.

7-SUPERMAX'S VALUATION COULD NORMALISE SHARPLY TO SINGLE DIGIT PE.

With the surge in earnings, Supermax’s one-year forward PE could normalise sharply to single-digit PE. It would trade at a significant laggard to peers. We believe Hartalega, Top Glove and Kossan should be trading at 45.0x, 23.5x and 23.0x PE to their respective financial year ends.
Other potential catalysts include being part of the FBMKLCI Index in Nov 20 should a vaccine be not discovered by then.

Comments by Freetospeak.

According to UOB calculation ,Supermax TP is rm20-22 in FY 2021. But they dare not put the price. No IB dare to put. UOB says Supermax is in single digit PE in FY2021 at today price. If it is PE 25 then it will be about 3x 7.20 =21.60.

Strong Q3 result with Q3 EPS 20 Sen and 9 mth YTD EPS of 18.1 Sen

Valuation of RM2 to RM2.50 with PE range of 8 to 10.

Genetec is due for rerating given its improvement in top and bottom line in Q3 on securing new orders of RM38.5 mil for its new financial year ended 31 March 2021.

At 1.58 Sen, it is currently trading on historical PE 11.8 based on FY 2019 EPS of 13.82 Sen and forward PE 6.52 using a projected EPS 25 Sen for FY2020. Based on our projected FY 2020 EPS of 25 Sen ( 9 mth YTD EPS is 18.1 Sen) , using PE 8 to 12 would give GENETEC a valuation range of RM2.00 to RM2.50.

For 9 mth YTD FY 2020 the Co recorded a revenue of RM72 mil (9 mth YTD FY 2019 RM82.8 mil) and a net profit of RM7.3 mil (9 mth YTD FY 2019 RM9.7 mil) with an EPS of 18.1 Sen (FY 2019 23.45 Sen).

Note that in FY 2019, there was an impairment of RM5 mil goodwill written off in Q4 FY 2019 turning it into a net loss after tax of RM 3.7 mil for Q4 and FY 2019 result with a lower profit of RM6 mil with EPS 13.82 Sen


REVIEW OF PERFORMANCE

For the current quarter Q3 ended 31 December 2019, the Group recorded a revenue of RM40.1 million, an increase of 16.2% or RM5.6 million as compared to a revenue of RM34.5 million recorded in the preceding corresponding quarter ended 31 December 2018.

The Group recorded a net profit before tax of RM8.1 million (NPAT RM8.1 mil with EPS of 20 Sen) for the current quarter under review as compared to a net profit before tax of RM5.0 million (NPAT RM5.0 mil with EPS of 12.4 Sen) in the preceding corresponding quarter ended 31 December 2018.The increase in net profit before tax was mainly attributable to higher sales volume achieved and improved operational efficiency.

Extracted From Bloombery's latest news.

The Gloves Kingdom Has Been Minting New Billionaires
By Yoojung Lee
June 16, 2020, 5:00 AM GMT+8 Updated on June 16, 2020, 10:50 AM GMT+8

“It has become a new norm to wear gloves for various purposes, including medical and retail, and the high usage will benefit their makers in the long term,” said Walter Aw, an analyst at CGS-CIMB Research. “Supermax is a very interesting story. It does its own brand manufacturing, while others are mainly suppliers.”

The only unwavering and steadfast Supermax Sifu here is fretospeak.

Always reassuring INVESTORS in this thread as Supermax is a SUPER company to HOLD till end of the year (at least) where the TP is easily Rm12-15.

Just watch out for their explosive Quarterly results

You will bedazzled.

Hartalega is the only company in the world with the technology and mass production line to produce antimicrobial gloves.(AMG)
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Dear Herbert Chua , apparently there is another company already producing AMG gloves.

Please don't mislead the investing public here. Thanks.

Here you go- and have a good day bro.

Antimicrobial Single-use Gloves by Unigloves
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Part of UG Healthcare, Unigloves is a UK-based manufacturer and distributor of high quality, single-use disposable gloves. With factories in Malaysia manufacturing a comprehensive range of standard and premium grade disposable gloves, they supply over 2 billion gloves each year to medical professionals and specialists in the food, automotive, janitorial and care sectors in over 50 countries around the world.

In March 2020, Unigloves has launched a new brand identity as part of ambitious growth plans across 2020 and beyond to reflect its position as a leading global manufacturer. Unigloves’ new brand assets include a simplified, single-colour logo, along with a new tagline – ‘KEEPING YOU SAFE’. Wider visual elements will seek to convey the advanced technologies used to manufacture and supply Unigloves’ growing product portfolio.

With ultimate hygiene in mind, Unigloves products are FirstTouch manufactured, examined and packaged with zero direct skin contact. Their Fortified range – Europe’s first antimicrobial nitrile gloves (AMG nitrile)– also benefits from inbuilt BioCote® protection that reduces bacteria by up to 99.9%.

feetospeak.in reply to Herbert Chua"s Comment

Supermax Malaysia chose not to lock-in capacity in March 2020 and prices with the big 5 giant distributors from the USA for supplying to US government agencies after the Trump Administration invoked the Defense Production Act
• Instead Supermax USA distribution centre is currently supplying to USA government agencies at higher distribution prices instead of at factory prices
• Supermax opted not to participate in pricing mechanism with big distributors from USA & Germany


Supermax is supplying direct to Government agencies.

HERBERT CHUA - DONT SPREAD FAKE NEWS.

Supermax Corporation - Quantum Leap
Date: 03/06/2020

Source : KENANGA
Stock : SUPERMX Price Target : 10.90 | Price Call : BUY

Contrary to our earlier assumptions, the industry ASP has risen further month-on-month in anticipation of tighter supply and supernormal demand due to the pandemic. We highlight that SUPERMXs OBM distribution model could yield higher price and margins. Industry ASP over the next few months is now higher by between 5% and 15%, as opposed to the previous monthly 5% hike. With a diverse customer base, we expect SUPERMX to have better pricing power, potentially getting higher than industry average selling prices. Hence, we raised our FY20E/FY21E net profit by 11%/43%, to account for higher margins. TP is raised from RM7.60 to RM10.90 based on unchanged 26x CY21E EPS. Reiterate OP.

Posted by Aramco > Jun 14, 2020 11:28 AM | Report Abuse

Why Supermax mother share this week High at RM 9.30 and Low at RM 7.50
and close at RM 7.91

I strongly believe it is the dirty trick of IB MACQUARIE CAPITAL SECURITIES to push down the mother share so c79 due 19-6-2020 will follow suit or else nothing have been done they will loose their pant off.

Next week after the expiry of c79 19th June , Supermax will continue the uptrend again easily above RM 9.00

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Many thanks for the information. this explains why Supermax shares being pressed at the close last Friday.

Thanks for the clarification Sifu SSlee.

Well said CharlesT.

Chatles T, don't panic , just grab Supermax shares on Monday and enjoy the ride. Cheers mate!

Since the boss loves number 8, the Quarterly results could be announced on the 8 of July. LOL.

Posted by superman_ > Jun 14, 2020 9:48 AM | Report Abuse

I read all comments, its really proof that supermx is a great and very profitable stock by lots of negative comments given without even thinking. They really think by posting vaccine, negative comment to convince ppl lost their believe in buying supermx? My goodness, you either a group of people in extreme poor in finance, extreme low self esteem, and you are definately lake of friends who lend you a listening ear. This is a serious mental issue.

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Correct Superman, the highly negative ones have serious mental issues.

Hi Freetospeak, will do the traditional way. Thanks.

Mutation could make coronavirus more infectious, study suggests

By Maggie Fox, CNN
Updated 0129 GMT (0929 HKT) June 13, 2020

CNN)Researchers in Florida say they believe they have shown that the new coronavirus has mutated in a way that makes it more easily infect human cells.

They say more research is needed to show whether the change has altered the course of the pandemic, but at least one researcher not involved in the study says it likely has, and the changes may explain why the virus has caused so many infections in the United States and Latin America.
It's a mutation that scientists have been worried about for weeks.

This is what fund manager Mr Ross Cameron said about Top Glove and Hartalega - Koon Yew Yin
Author: Koon Yew Yin | Publish date: Sat, 13 Jun 2020, 2:35 PM

SINGAPORE: Northcape Capital Ltd, one of the largest shareholders of this year’s top gainers in Asia — Top Glove Corp and Hartalega Holdings Bhd — says the two stocks have further room to run.

The pandemic has caused a structural change in demand for gloves, so earnings at some makers will double in each of the next two years and drive their stocks to outperform, according to Ross Cameron, a fund manager at Northcape, which overseas about $7 billion (RM30 billion) in assets globally.

“The duration of super-normal demand is still longer than most people realise,” Cameron said.

Factors that will continue to support the share rally include product price increases and the fact many nations are ill-prepared for pandemics, he said.

Shares of the world’s biggest glove makers Top Glove and Hartalega, both listed on Malaysia’s bourse, have soared 257% and 136% this year, respectively, making them the top gainers in MSCI Inc’s broadest gauges of stocks listed in Asia and emerging markets.

Their rally has vaulted the two firms into the list of top companies in Malaysia and driven their valuations into uncharted territory.

Northcape, an Australia-headquartered asset manager that has been investing in the shares of glove makers for more than a decade, bought more glove-makers’ shares early this year “when signs emerged that Covid-19 would become a global pandemic”, Cameron said.

According to his calculations, Top Glove will generate average earnings growth of more than 100% for each of the next two years while Hartalega will also deliver “exceptionally strong” earnings growth as personal protective equipment purchases increase globally.

Some glove makers have “an order backlog all the way out to June 2021”, compared with one month before the pandemic, he said.

The discovery of a vaccine to prevent Covid-19 disease will also help keep demand elevated because “glove companies and some experts have noted that the widespread administering of a vaccine will actually result in a further spike in glove demand”, he added.

Shares in Top Glove and Hartalega are trading close to their record valuations, based on 12-month forward estimated earnings, according to data compiled by Bloomberg.

Analyst price targets have failed to keep pace with rapid stock gains.

Cameron said that “analysts are still behind the curve in updating their estimates, which is why the stocks look expensive on a headline basis”.

Most of the analysts “still underestimate how high margins could go in this environment”, he added.

Northcape’s earnings estimate for Top Glove for the fiscal year 2021 is more than 60% above the Bloomberg consensus estimate.

This puts Top Glove on a forward price-to-earnings ratio of just 23 times, Cameron said. That compares with 37 times based on estimates of analysts tracked by Bloomberg.

“There are very few companies globally which can deliver anything close,” he said.

My comment:

I am sure all the glove makers are taking advantage of the high demand for gloves to increase the selling price for their gloves which is pure profit. Imagine the normal profit is about 10 percent of the revenue. If they increase the selling price by another 20%, the total profit will be 30% of the revenue.

That means the annual profit is increased by 200%.

I believe these leaders will help pull up Comfort and Supermax, like a rising tide lifts all boats.

Posted by staypositive > Jun 13, 2020 12:28 PM | Report Abuse

The naysayers become more and more toxic when they can't earn quick money..

As echoed by Targeted _
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Trade with caution, invest with confidence.

When traders try to talk about investing to investors they really sound like semi educated fools.

How true.

Supermax may be under Northcape Capital Ltd 's radar with the admission to FTSE Russell Hijrah Index.

Northcape Capital Ltd, one of the largest shareholders of this year’s top gainers in Asia — Top Glove Corp and Hartalega Holdings Bhd — says the two stocks have further room to run.

The pandemic has caused a structural change in demand for gloves, so earnings at some makers will double in each of the next two years and drive their stocks to outperform, according to Ross Cameron, a fund manager at Northcape, which overseas about $7 billion (RM30 billion) in assets globally.

“The duration of super-normal demand is still longer than most people realise,” Cameron said.

Factors that will continue to support the share rally include product price increases and the fact many nations are ill-prepared for pandemics, he said.

Posted by Targeted > Jun 13, 2020 11:50 AM | Report Abuse

Trade with caution, invest with confidence.

When traders try to talk about investing to investors they really sound like semi educated fools.
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Targeted. Bullseye on Target, Spot on !

BELIEVE in this SUPERSTOCK and you will be Handsomely rewarded.

Rubber gloves manufacturers - especially the Big 4, with SUPERMAX ( the OBM King) in particular are set to grow exponentially in view of COVID-19

The COVID-19 new cases are on the rise and a vaccine is only expected to surface in a year's time by the optimist. However, scientists are of the view that the chances of finding vaccine is slim. Hence the demand for PPE's especially gloves are set see tremendous demand. In fact demand has far exceeded supply and this led to a massive surge in the average selling price (ASP). If you are manufacturing (OBM) and distributing your own brand, your margin will be astronomical. Hence, the future earnings which is the catalyst for further price appreciation for SUPERMAX is fantastic to say the least.

Another massive shot in the arm is that, SUPERMAX has caught the eye of FTSE Bursa Malaysia Hijrah Shariah and will admit SUPERMAX to the index on the 22nd June 2020 after undergoing stringent criteria - thus joining the ranks of top notch gloves makers ie. Top Glove and Hartalega. ( TG & HARTA has since been upgraded to the Composite index)

Funds- local and foreign, will be scrambling for SUPERMAX shares come 22nd June, which is just 5 market days away. You throw and they will be happily mopping up.

Incidentally some "gamblers" (they are not investors) who lost money punting on SUPERMAX stocks recently, come here and post negative comments even though the company is projected to achieve at least RM200m in the coming quarter. Supermax will probably make an early announcement of this sterling performance.

These sore gamblers recently lost their pants using borrowed money (margin account & contra play), money that they do not own. Now, they are frustrated and cannot think properly, just spewing garbage here to hoodwink the weak holders.

Investors should know the prospect of the company they invest in and don't be influenced by some irresponsible /unscrupulous individuals.

Why sell now at Rm8 when you can easily fetch at Rm12-15 in 6 months time ?

Just INVEST and BELIEVE in this amazing SUPER growth stock. Be PATIENT, no stocks goes up in a straight line, they need to CONSOLIDATE before moving up again.

Thank you.

Many thanks for the impressive writeup allbeit a tad conservative. Your 2 cents certainly worth a million.

Upgrade to BUY (previously NEUTRAL) with a revised TP of RM1.17 (previously RM0.97). We maintain our earnings forecast for FY20E/FY21F and roll over our valuation to peg our TP to FY21F EPS of 8.97 sen. Our PER of 13.0x is unchanged. Looking past 1HFY19, we expect operational and financial improvement at Superlon to enhance its profitability in FY21F.

Another catalyst is lower raw material cost that prolongs. Since end-October, certain main raw ( butadiene) material cost has eased by 60-70%.

March 2017 butadiene price @ USD 2150.

Now June 2020 butadiene price @ USD 370.

Source: MIDF Research

EWINT has a long way to go TP 1.20 ( IPO price)

EWI president and CEO Datuk Teow Leong Seng noted that the weak sterling has also made UK property purchases more affordable for Hongkongers. “Hong Kong has always been an important market for us.

FY2020 ending 31/10/2020, Ewint will be reporting a record high for both revenue & profit.

RM1.1 B revenue for FY19, profit 190 M. FY20 revenue RM2.2 B, than should be easily 300 M. IPO price RM1.20. End Dec 1.10. The Company should achieve record profit. RM1.10 to RM1.20 is the minimum

Prospects are looking absolutely bright for EWINT.

KUALA LUMPUR: There has been an increase in the number of Hong Kong buyers looking to purchase a home at Malaysian-owned Battersea Power Station in London in the past few months as UK immigration policy could pave the way to citizenship for Hongkongers.

Recently, British prime minister Boris Johnson had vowed to overhaul immigration rules to grant almost three million Hong Kong residents a pathway to British citizenship in response to Beijing’s move to impose the national security law as a threat to the city’s autonomy.

EWI president and CEO Datuk Teow Leong Seng noted that the weak sterling has also made UK property purchases more affordable for Hongkongers. “Hong Kong has always been an important market for us."

PETALING JAYA: As property market activity in the UK picks up after a two-month hiatus from lockdown measures, the property scene is not just regaining interest from local buyers and tenants.

Enquiries on London real estate by prospective buyers from Hong Kong are expected to rise, following UK prime minister Boris Johnson’s offer to three million Hong Kong residents and their dependents the chance to seek refuge in the UK.

ECO WORLD International Bhd (EWI), which has a significant presence in the UK, has sold over £20mil (more than RM100mil) worth of properties to Hong Kong buyers, over three weekends last month.

These properties are located at London City Island and Embassy Gardens in Central London, as well as Aberfeldy Village in Greater London.

EWI president and CEO Datuk Teow Leong Seng noted that the weak sterling has also made UK property purchases more affordable for Hongkongers.

“Hong Kong has always been an important market for us.

The Star dated 3rd June 2020.

Short Selling Suspended Till further Notice- Bursa Malaysia.

The review of stocks in the list of regulated short selling (RSS) approved securities will temporarily be suspended until further notice, said Bursa Malaysia Securities Bhd.

Yesterday, Bursa Malaysia announced that the list of RSS approved securities will be updated after the temporary suspension of short selling frameworks has been lifted.

“With no short selling, this will stabilise the market.

FOCUS ON THE BIG 4 (Excerpts from the Pelham Blue Fund)

The Big 4 - TOPGLOV, KOSSAN, HARTA, and SUPERMX. As a collective, they have enough scale, and enough of a protective moat, to dominate the bulk of future revenues in this sector over the next two years.

They specifically possesses inherent advantages that will ensure the bulk of the business (glove orders) flow to them. It's a kind of protective moat that I would put a premium on.

What are they? Let me take a deep breath here...

You need really solid QCs. You can't run afoul of the US FDA standards, otherwise you'll end up with 100 containers of unusable gloves. You need an established global sales network. You should ideally have loyal and repeat customers who have kept coming back. You need to be experienced and credible enough to have done direct negotiations with foreign governments and their health ministries. You simply cannot deliver a batch of shoddy gloves when frontliners around the world need them to protect their lives. Your history of success supplements your reputation. Trust, quality of product, and delivery, are not expected to be an issue.

I don't mean to knock off the non-Big 4 names. It's just that their share of the spoils, even on a cumulative basis, will be much smaller compared to say, what SUPERMX will be getting in the coming years.
The Big 4's protective moat is evidenced by the customers' intent to acquire their product, no matter the price. Customers know that these guys can deliver; they just need to pay up.

For the first time, glovemakers have real leeway to adjust pricing, in a business that is notoriously thin in margins. Average selling prices are shooting up, again justified by the demand shock.

In a real demonstration of the extent of this demand shock, the sellers are dictating not only the prices, but also the terms.

To lock in their orders, customers are now required to pay advance deposits.

In other words, the Big 4 are actualising part of future sales, today. In real money. That earnings bump is assured.

Based on one estimate, spot prices have gone up from $25 in pre-Covid times to $100 presently. That's a 300% increase. Exponential.

KUALA LUMPUR: TAEL Partners, a private equity fund, has agreed to a second round of emergency shareholders' injection of RM22mil into WRP Asia Pacific Sdn Bhd.

The lawyers acting on behalf of the current board of directors (BoD) of WRP, Thomas Philip Advocates and Solicitors, said the funds are intended to be channelled to the INTERIM LIQUIDATOR. of WRP Asia Pacific SB..

Glove maker WRP Asia Pacific Sdn Bhd has initiated legal action against its former managing director and CEO Datuk Lee Son Hong as part of efforts by its directors to revive its business.

"The company was mismanaged by the previous CEO Datuk Lee, who refused to account to the board of directors as to WRP Asia Pacific's state of affairs," WRP Asia Pacific said in a statement today.

"With scant regard to the company or its employees, on June 17, 2019, Datuk Lee conspired to wind up the company and there is presently an action in court for conspiracy to injure.

"Additionally, the board of directors has also filed an action against Datuk Lee for criminal breach of trust involving RM8.4 million. On Nov 29, 2019, the board removed Datuk Lee as the managing director and CEO of the company," WRP Asia Pacific added.

Information on the Exchangeable Bonds with face value of USD200m

Top Glove Corporation Berhad - Issuance of Exchangeable Bonds
Author: PublicInvest Research - Publish date: Tue, 5 Mar 2019, 10:05 AM

Top Glove has successfully, on the 1st of March 2019, issued its guaranteed exchangeable bonds, with a face value of USD200m (c. RM814.1m). The exchangeable bonds were issued with the main purpose of repaying existing borrowings and reduce interest costs going forward. The bonds were priced with a fixed coupon rate of 2% per annum. Tenure of the bond issue is 5 years. This move will free up Top Glove’s bank loan facilities, allowing it to fund and support future growth, particularly through M&A. We view this move positively as it will effectively reduce the Group’s finance cost by RM16m p.a, about 2% of FY19 operating profit, for the next 5 years.

Use of funds. Proceeds from the bond issuance will be used to pare down the Group’s debts, of which, RM630.9m will be used to repay syndicated loans that funded for Aspion’s acquisition, RM169.4m will be used to repay borrowings used to fund the Group’s working capital, and the remaining RM13.8m will be used to fund for the estimated fees, commission and expenses related to this bond issue.
Alternative to raise funds. Considering that the bond comes with a convertible feature, holders of the bond have the right to convert the bond to the Group’s ordinary shares at an exercise price of RM6.204 per share, anytime during the exchange period. The exercise price reflects a 20% premium to its closing price of RM5.17 on 20th Feb 2019.

Financial impact. The issuance of exchangeable bond is not expected to impact the Group’s borrowings and its gearing ratio as it will be used to retire existing debt. With this issue, the Group intends to save approximately 50% of the existing interest costs for these borrowings, which will translate to cashflow savings of RM16m p.a.

Considering that the coupon rate is fixed at 2% per annum, the Group will thereby limit its exposure to any future fluctuations in LIBOR. Although the bonds are embedded with a convertible feature, however, we do not expect any immediate dilution of earnings since the conversion of shares should only take place when the exercise is in the money, as share price trends above RM6.20

The craze for rubber glove shares amid the COVID-19 pandemic is nowhere near the end just yet, said Maybank Kim Eng.

The strong interest, the research outfit added, is not just a simple cyclical phenomenon, but a structural step up for the sector in terms of demand as well as pricing.

"It is a multi-year story for the glove makers, and not just a blip,” said Maybank Kim Eng head of regional equity research Anand Pathmakanthan. He said that while the cyclical element to the rubber glove sector is obvious, the market may have missed that the sector also has a structural element to it.

Speaking at Maybank Kim Eng's Invest Asean 2020 virtual conference today, Anand said with COVID-19 cases being reported unabated across the world, there will continue to be a need for rubber gloves.

This leads to a spike in demand for the product, he said, adding: "This then results in higher utilisation and better economy of scale and definitely a lot better pricing power.

“What the market has missed is the structural flow through from what has happened. The world will never be the same again, especially the healthcare sector,” said Anand.

“People are going to be much more cautious about treatments and what medical equipment they use going forward to ensure that contagion does not happen again and gloves are going to be an essential part of that,” he said.

Anand noted that many parts of the world have been slow in getting onto the rubber gloves bandwagon or are satisfied with low quality gloves or vinyl gloves.

But now, they are scrambling to upgrade and increase the volumes of gloves they buy, he added.

The craze for rubber glove shares amid the COVID-19 pandemic is nowhere near the end just yet, said Maybank Kim Eng.

The strong interest, the research outfit added, is not just a simple cyclical phenomenon, but a structural step up for the sector in terms of demand as well as pricing.

"It is a multi-year story for the glove makers, and not just a blip,” said Maybank Kim Eng head of regional equity research Anand Pathmakanthan.

He said that while the cyclical element to the rubber glove sector is obvious, the market may have missed that the sector also has a structural element to it.

Speaking at Maybank Kim Eng's Invest Asean 2020 virtual conference today, Anand said with COVID-19 cases being reported unabated across the world, there will continue to be a need for rubber gloves.

This leads to a spike in demand for the product, he said, adding: "This then results in higher utilisation and better economy of scale and definitely a lot better pricing power.

“What the market has missed is the structural flow through from what has happened. The world will never be the same again, especially the healthcare sector,” said Anand.

“People are going to be much more cautious about treatments and what medical equipment they use going forward to ensure that contagion does not happen again and gloves are going to be an essential part of that,” he said.

Anand noted that many parts of the world have been slow in getting onto the rubber gloves bandwagon or are satisfied with low quality gloves or vinyl gloves.

But now, they are scrambling to upgrade and increase the volumes of gloves they buy, he added.

The craze for rubber glove shares amid the COVID-19 pandemic is nowhere near the end just yet, said Maybank Kim Eng.

The strong interest, the research outfit added, is not just a simple cyclical phenomenon, but a structural step up for the sector in terms of demand as well as pricing.

"It is a multi-year story for the glove makers, and not just a blip,” said Maybank Kim Eng head of regional equity research Anand Pathmakanthan.

He said that while the cyclical element to the rubber glove sector is obvious, the market may have missed that the sector also has a structural element to it.

Speaking at Maybank Kim Eng's Invest Asean 2020 virtual conference today, Anand said with COVID-19 cases being reported unabated across the world, there will continue to be a need for rubber gloves.

This leads to a spike in demand for the product, he said, adding: "This then results in higher utilisation and better economy of scale and definitely a lot better pricing power.

“What the market has missed is the structural flow through from what has happened. The world will never be the same again, especially the healthcare sector,” said Anand.

“People are going to be much more cautious about treatments and what medical equipment they use going forward to ensure that contagion does not happen again and gloves are going to be an essential part of that,” he said.

Anand noted that many parts of the world have been slow in getting onto the rubber gloves bandwagon or are satisfied with low quality gloves or vinyl gloves.

But now, they are scrambling to upgrade and increase the volumes of gloves they buy, he added.

The craze for rubber glove shares amid the COVID-19 pandemic is nowhere near the end just yet, said Maybank Kim Eng.

The strong interest, the research outfit added, is not just a simple cyclical phenomenon, but a structural step up for the sector in terms of demand as well as pricing.

"It is a multi-year story for the glove makers, and not just a blip,” said Maybank Kim Eng head of regional equity research Anand Pathmakaran. He said that while the cyclical element to the rubber glove sector is obvious, the market may have missed that the sector also has a structural element to it.

Speaking at Maybank Kim Eng's Invest Asean 2020 virtual conference today, Anand said with COVID-19 cases being reported unabated across the world, there will continue to be a need for rubber gloves.

This leads to a spike in demand for the product, he said, adding: "This then results in higher utilisation and better economy of scale and definitely a lot better pricing power.

“What the market has missed is the structural flow through from what has happened. The world will never be the same again, especially the healthcare sector,” said Anand.

“People are going to be much more cautious about treatments and what medical equipment they use going forward to ensure that contagion does not happen again and gloves are going to be an essential part of that,” he said.

Anand noted that many parts of the world have been slow in getting onto the rubber gloves bandwagon or are satisfied with low quality gloves or vinyl gloves.

But now, they are scrambling to upgrade and increase the volumes of gloves they buy, he added.

Interesting article on WRP Asia Pacific SB- Here you go-

Glove manufacturer WRP Asia receives emergency funds to pay wages owed to migrant workers, following liquidation


Author: Geraldine Tong, Malaysiakini, Published on: 13 January 2020

"Glovemaker WRP get emergency funds to pay workers", 2 January 2020

An emergency shareholders injection of RM3.25 million was today channelled to the liquidators of glovemaker WRP Asia Pacific Sdn Bhd to enable the beleaguered company to pay its workers.
The firm... issued an internal memo to announce a temporary suspension of operations.
The emergency cash by shareholders was pumped by private equity fund TAEL Partners, WRP's board of directors said...The firm's board has also drawn up a plan to revive the firm and offered a "turnaround team" to assist the interim liquidators...
This comes three months after WRP was banned by the US Customs and Border Protection... agency on suspicion of using forced labour.
Last January, nearly 2,000 of WRP's Nepali migrant workers held a three-day strike over months of unpaid wages...

The Board of Directors (“Board”) and major shareholders of Acoustec, wish to inform that as at todate:-

1. We are not aware of any corporate development relating to Acoustech Group’s business and affairs that has not been previously announced that may account for the trading activity;

2. We are not aware of any rumour or report concerning the business and affairs of Acoustech Group that may account for the trading activity;

3. We are not aware of any other possible explanation to account for the trading activity.

Dear freetospeak,

You are certainly the best in this thread, contributing intelligent and factual comments and also projections. You have invested a great deal of time gathering all the factual info and we salute you for it.

Its always a pleasure reading your posts, yup very re-assuring.

Thank you and keep up with the good work .

Have a good day Sir

Dear CCL.

The industry ASP has risen further month-on-month in anticipation of tighter supply and supernormal demand due to the pandemic. TOPGLOV’s ASP for months of June to Aug is now higher by between 5% to 15%, as opposed to earlier guidance of +5%, indicating supply tightness have further propelled ASP higher.

These led to investment bankers to be generous in their valuations. Anyway lets be patient as the quarterly results will be announced next week ie on the 11th June.

My gut feel is that it will be dazzling.

Kenanga Re-rates TOP GLOVE to RM12-10

Date: 02/06/2020

Source : KENANGA
Stock : TOPGLOVE RM12-10

Contrary to our earlier assumptions, the industry ASP has risen further month-on-month in anticipation of tighter supply and supernormal demand due to the pandemic. We highlight that TOPGLOV’s ASP for months of June to Aug is now higher by between 5% to 15%, as opposed to earlier guidance of +5%. With a diverse customer base, we expect TOPLGOV to have better pricing power and hence potentially higher-than-expected industry average prices. Hence, we raised our FY20E/FY21E net profit by 18%/28%, to account for higher ASPs. TP is raised from RM15.60 to RM20.10 based on unchanged 36x CY21E revised EPS. Reiterate Outperform.

ASPs higher than earlier guidance. We highlight that TOPGLOV’s ASP for months of June to Aug is now higher by between 5% to 15%, as opposed to earlier guidance of +5%, indicating supply tightness have further propelled ASP higher. However, spot price is about 3x the normal prices of USD28-30/1000 pieces which accounts for 5%-10% of total allocation. With a diverse customer base, we expect TOPLGOV to have better pricing power and hence potentially higher-than-expected industry average prices. We highlight that market consensus is still underappreciating the potential impact from higher-than-expected ASPs in this continuing pandemic and tight supply condition. Due to the tight supply, we expect buyers to jockey for position in order to secure allocation which will push up ASPs. Personal Protective Equipment (PPE) of which glove is one of the components is presently much sought after due to limited supply. Longer delivery lead times are indicating that demand will outstrip supply at least over the medium-term. Management highlighted that requests for huge volumes of gloves to the tune of 400m to 500m pieces are coming from countries that include Spain, France, Italy, Germany, and Saudi Arabia. This lends us the confidence that mid to high-teens growth in volume sales are achievable in FY20 and FY21 since orders have been secured up till end Dec 2020 to early 2021. The robust demand has led to longer delivery lead times which has risen to >300 days from 80 to 100 days two months ago.

Capacity expansion include: Factory 7A (operational by end-1Q 2020; 0.4bn pieces), Factory 2B (operational by 1Q 2020; 0.7b pieces), Factory 5A (operational by 1Q 2020; 2.5b pieces), Factory 40 (Phase 1 operational by 2Q 2020 and Phase 2 operational by 3Q 2020; 2.7b and 2.0b pieces), Factory F41 (2Q 2020; 4b pieces) and Factory 8A (by 4Q 2020; 3.5b pieces) to boost the group’s production capacity in 2020 by 11.8b gloves per annum to 81.9b (+17%).

Raised FY20E/FY211E net profit by 18%/28% after hiking our ASP from USD29/1,000 to USD32/1,000 and USD33/1000 pieces for FY20 and FY21, respectively.

Reiterate OP. Correspondingly, TP is raised from RM15.60 to RM20.10 based on unchanged 36x CY21E revised EPS of 55.9 sen (at slightly above +2.0SD above 5-year historical forward mean). Its merits are: (i) strong management, (ii) ability to supply in the current tight market conditions, and (iii) solid earnings growth averaging 105% per annum compared to FY20E and FY21E PERs of 40x and 28x, respectively. Historically, the stock moves ahead of two quarters of solid results.

Latest Research by Maybank Kim Eng- Analyst Lee Yen Ling. TP Rm20-00

Despite the sharp rise in share prices, analysts do not think the current share price of Top Glove have factored in all the good news.

In short, in their view, glove makers will earn much higher profits so share prices should also be much higher than current price.

With optimistic prospects ahead supported by expectation of strong surge in sales volume given the Covid-19 pandemic, and wider profit margin, glove analysts are busy with revising their forecasts and target prices as the rally continues.

In a research note today, Maybank Kim Eng analyst Lee Yen Ling wrote that “massive earnings explosion in coming quarters will throw brokers’ forecasts out of the window”.

Lee has raised its target price of Top Glove to RM20, implying a 49% share price increment from the current price of RM13.38 amid expectation of higher average selling prices (ASPs) and exponential growth on glove consumption worldwide.

Maybank KimEng raised its earnings per share forecast by 37% for the financial year ending Aug 31, 2020 (FY20), 180% for FY21 and 18% for FY22 to impute for ASP hikes and spot orders until 1QFY21 (September to November 2020).

“Our earnings forecasts could still be conservative as glove players might continue to raise ASPs until June 2021,” said Lee.

“Comparing the confirmed ASPs in September 2020 against January, the ASPs have increased 40-50%. Though the hikes are steep, the ex-factory price for a pair of gloves is just six US cents. This is still very cheap for the developed markets, for example US and Europe."

Lee anticipates Top Glove’s net profit to soar to RM3.2 billion in FY21 compared with forecast of RM1.1 billion in FY20. However, Top Glove’s net profit is expected to shrink to RM663 million.

If Top Glove is able to grow its market cap by 49% to RM52 billion, this would imply that the glove manufacturer will be the fourth largest listed company in Malaysia, surpassing chemical giant Petronas Chemical Group Bhd and hospital operator IHH Healthcare Bhd, should their share prices remain underperforming.

So far, 2020 is a prosperous year for glove makers as all of their fortune has leapt by a large quantum.

Credit Suisse raises target price for Top Glove to RM23, expects record FY21

KUALA LUMPUR (June 4): Credit Suisse has raised its target price for Top Glove Corp Bhd to RM23, more than double of RM11.30 previosly, on the ground that there has been a recent rise in ad hoc and spot orders by government agencies needing urgent deliveries.

In a note dated June 3, Credit Suisse analyst Joanna Cheah said while pricing was not locked in upfront for these volumes, the group took deposits between 10% and 30%, based on projected average selling price (ASP) increases depending on the expected month of delivery and thus, Top Glove had decided to allocate 10% of its capacity for these spot orders.

"Given the long lead time for normal orders, it is therefore no surprise that ASP for the ad hoc spot orders is much higher.

"According to management, some of these orders were priced above US$100 per 1000 pieces, which is more than three times higher than the current blended ASP for the normal orders," Cheah said.

In addition, while the company was previously guiding for 5%-10% increases in ASP every quarter, given the further squeeze in demand-supply for gloves, it was now guiding for a monthly double-digit ASP increase at least for the next two months.

"Given the revised strategy and ASP guidance by the company, we have raised our FY20 (financial year 2020)-FY22 earnings per share by 20%-135%. We now expect the group's earnings to grow 182% in FY20, a further 122% in FY21 but decline by 63% in FY22 as ASP normalises.

"Our earnings forecast assumes that ASP will rise by 20% in FY21 for both nitrile and powder-free gloves, and decline by 20% in FY22," she said.

She added that Top Glove's results for the third quarter of FY20 set to be released on June 11 are expected to be strong and should drive further rerating of the stock.

Another re-rating by Macquarie Research dated 5th June 2020.

Macquarie Equities Research (MQ Research) upgraded Top Glove’s target price (TP) to RM20.50 based on the increased assumption on Top Glove’s average selling price (ASP) by 10-15%, resulting in a 54%/44% increase in FY20E-22E earnings. Also, ahead of Top Glove’s earnings results scheduled to be released next week, MQ Research expects a better-than-expected 3QFY20 and an even stronger 4Q20.

Conclusion
MQ Research reiterates an Outperform rating on Top Glove with an increased target price of RM20.50 based on a higher CY21 price-to-earnings (PE) ratio of 40x vs RM12.30 on a 32x PE before. The strong pricing power and lower customer concentration risk provide Top Glove more flexibility to raise the average selling price (ASP), and now the company is looking to increase guidance, indicating upside risk to consensus estimates. As MQ Research views gloves as a staple within the medical sector, MQ Research thinks the valuation is undemanding and looks more attractive than consumer staples, which trade at a >40x PE with lower earnings growth of ~10% vs Top Glove: 27%.

Impact
New and more aggressive ASP strategy. Shortages have led to stronger pricing power for glove manufacturers. Based on MQ Research’s checks, Top Glove increased its June and July order deliveries higher than initial guidance of 5% per month. In addition, Top Glove implemented a new capacity allocation strategy for the remainder of 2020 – 10% for spot orders, which has at least a 2.5x-3x higher ASP, and increased its exposure to smaller distributors, which allows more upside risk to the ASP in this period. As such, MQ Research raises its FY20E-21E ASP assumption by 10-15%.
Expect good 3QFY20 results but 4QFY20 to be stronger. 3QFY20 results will start reflecting the COVID-19 orders and the total ASP increase of 10%-15% in March-May order deliveries. However, MQ Research expects 4QFY20 will be even stronger on the back of the more aggressive ASP increases and its new capacity allocation strategy. MQ Research expects the 2HFY20 earnings before interest tax, depreciation and amortization (EBITDA) margin will be expanded to 33%, the highest since its listing. MQ Research’s 2HFY20 implies a quadruple in net profit vs 1HFY20

Multiple re-rating due to strong quarterly earnings.
History has shown that Top Glove’s share price tracks quarterly earnings. MQ Research believes the next re-rating catalyst is strong 4QFY20-3QFY21 quarterly earnings. The stock is likely to re-test its peak PER valuation of 40x. MQ Research believes consensus has not baked in its latest strategy. MQ Research’s FY20E-21E are 83-88% ahead of consensus.
Earnings and Target Price Revision
MQ Research raises its FY20E-22E earnings per share by 54%/44% to reflect a higher ASP.

Price Catalyst
12-month price target: RM20.50 based on a PER methodology.
Catalyst: quarterly results, further ASP increases.
Action and recommendation
MQ Research reiterates an Outperform on Top Glove with a higher target price of RM20.50.

Source: Macquarie Research - 5 Jun 2020

8 is the luckiest number in Chinese culture because 八 sounds like 發 (fa), which means “wealth”, “fortune”, and “prosper” in Chinese. Multiples of eight are even better, as 88 bears a resemblance to 囍 (shuāng xǐ), or “double happiness”.

Fantastic close 8.88 +68 sen. Auspicious numbers all the way!

Adventa Bhd is engaged in the business of medical services and related supplies manufacturing. The company’s segments include Healthcare products ie PPEs, Sterilization provider, Home dialysis products and services. The healthcare products segment (PPEs) is engaged in manufacturing, distributing and trading of healthcare products.

In short Adventa is a one stop shop which trades and manufactures a wide range of PPEs.

Adventa could be the candidate for the back door listing of WRP Asia Pacific ( manufactures 11 billion gloves pa) for all we know.

Wow 1,468,000 shares done at closing price of Rm 8.20. Excellent!
Real Super stock.

Superman proved all the naysayers, doubting Thomas', the sour grapes and especially the retards wrong.
Very nice half time score of RM7.88
Probably close today at rm8.88 -yup all the fatts,
Stanley's favourite number lol.
A quantum leap indeed !

KUALA LUMPUR (June 3): AmInvestment Bank Bhd, CGS-CIMB Securities Sdn Bhd and UOB Kay Hian Securities (M) Sdn Bhd have tightened their share margin financing standards for shares in rubber glove manufacturers following the recent rise in their stock prices, according to these financial services providers' circulars.

The share margin financing valuation changes involve shares in Top Glove Corp Bhd, Hartalega Holdings Bhd, Kossan Rubber Industries Bhd, Supermax Corp Bhd, Adventa Bhd, Comfort Gloves Bhd, Careplus Group Bhd and Rubberex Corp (M) Bhd, the circulars show.

AmInvestment's circular shows it has capped the share margin financing valuation for Hartalega at RM6.09 while the valuation for Top Glove is limited at RM6.21. AmInvestment's circular indicates share margin financing valuation for Kossan is capped at RM6.07 while the figure for Supermax is limited to RM4.37. Meanwhile, the share margin financing valuation for Adventa is limited to RM1.57 while the figure for Careplus is capped at 36 sen, according to the document.

CGS-CIMB's circular shows that it has capped the share margin financing valuation for Hartalega and Top Glove at RM9 and RM11 respectively while the limits for Kossan and Supermax are set at RM7 and RM5 respectively. For Rubberex and Comfort Gloves, the figures are capped at RM3 and RM2.80 respectively, according to the circular.

At UOB Kay Hian, the stockbroking firm is limiting the financing threshold to a 35% discount on the latest closing share prices of Hartalega, Top Glove, Kossan, Supermax, Rubberex, Comfort Gloves, Careplus and Adventa.

UOB Kay Hian has also issued a mandate on its normal share trade accounts where any transaction of rubber glove shares in excess of RM100,000 must be fully covered by cash.

Across Bursa at 12:30pm today, share prices of rubber glove manufacturers settled lower. Bursa's top decliner Hartalega fell RM1.52 or 11.93% to RM11.22 followed by Top Glove, the price of which dropped RM1.18 or 7.97% to RM13.62.

Bursa's healthcare index, which includes rubber glove manufacturers, settled down 5.67% to become the largest percentage decliner among the exchange's indices.

Besides AmInvestment, CGS-CIMB and UOB Kay Hian, it was reported that Maybank Investment Bank Bhd and RHB Investment Bank Bhd also tightened their share margin financing valuations on glove-related counters, starting yesterday, following the recent craze for glovemakers' stocks.

According to circulars issued by Maybank and RHB, margin financing caps were imposed on the shares in Hartalega, Top Glove, Kossan, Supermax, Rubberex and Comfort Gloves at lower valuations compared to their current share prices.