Seems like you completely missed the point. I am 3x vaccinated since December, and I have been actively asking friends and relatives to get a booster dose asap. This has nothing to do with what I wrote above.

You ask people to "chill", because we have vaccines and antivirals, which is very dangerous. Vaccines are a mismatch, and even though Malaysia has a very high vaccination rate, the efficacy rate against Omicron is low, as shown by multiple studies so far. Additionally, Malaysia doesn't have an effective antiviral as you are claiming.

Molnupiravir showed 30% efficacy in trials, orders had been canceled by multiple countries, including France:

https://www.reuters.com/world/europe/france-cancels-order-mercks-covid-19-antiviral-drug-2021-12-22/

Monoclonal antibody treatments do not work against Omicron either:
https://www.nature.com/articles/s41591-021-01678-y
https://www.nejm.org/doi/full/10.1056/NEJMc2119407

Only Sotrovimab retains any efficacy, but nobody has that treatment yet.

Meanwhile Israel scientists find that people deteriorate 10 days after supposedly recovering from Omicron: https://twitter.com/Gab_H_R/status/1490467088607191046

The reason for this is that even after vaccination (remember all vaccines we use right now are for a mismatched variant), COVID continues to weaken the immune system, depleting T cells, and causing damage to the vascular system and the brain. See here for instance: https://www.youtube.com/watch?v=OkFGJj1zUFI

Updated with more info:

- Sharp increase in hospitalization rates in Gauteng province of South Africa (stats by province and by hospital);

- Increase in cases in Brentwood and Nottingham, especially among children (Omicron cases there connected to schools);

The article includes sources of data, and all original sources of information.

(i3 bars me from sharing the link)

The original article has been updated with more recent data from South Africa and the United Kingdom.

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The original article has been updated with more recent data from South Africa.

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gohkimhock, thank you for your comment.

The scientific community generally doesn't expect the infectivity and lethality of the Omicron variant to be much different from Delta, or other earlier variants. However, if it proves to be as transmissible as it appears to be, and if it manages to break through already developed immunity against earlier variants of SARS-COV-2, that is where the challenge will come. A few things of import:

- Reproductive number in the province where the variant is prevalent is close to 2, indicating quadrupling of cases every 6 days.

- A specific combination of mutations, not seen before in the wild, has been demonstrated experimentally to have the highest binding affinity, i.e. this particular combination of mutations allows the virus to bind to the human cell the best.

- The large number of mutations to the spike protein means monoclonal antibody therapies - one of the main ways we've been fighting the pandemic so far - are likely to be ineffective.

Cases now reported in:

AFRICA:
South Africa
Botswana
Malawi (suspected)
Mozambique (suspected)

ASIA and OCEANIA:
Hong Kong
Australia
Israel

EUROPE:
Belgium
Italy
United Kingdom
Czech Republic
The Netherlands (suspected)
Germany (suspected)
Denmark (suspected)
Austria (suspected)

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Arrogant83, let's keep the discussion civil please.

Tobby, thank you for your comments.

Vaccination rate in South Africa is higher than would be anticipated.

As of 27 November:
- Fully vaccinated adults = 35.58%
- Adults with at least 1 dose = 41.39%

That isn't as low as a reproductive number (Rt) of close to 2 would suggest.

"investmalaysia7777 yeah, that time when topglove kena banned by CBP, this sinkalan Ben Tan quickly came out with an article saying it does not affect topglvove a lot. That is even before topglove management came out and say something"

It is libelous to spread lies. Reference to the source: https://klse.i3investor.com/blogs/bursainvestments/2021-03-30-story-h1543051556-Top_Glove_s_CBP_Ban_Implications_and_Thoughts.jsp

"arv18 Where o where is Ben Tan?"

Someone told me you were looking for me. I rarely read here as it is pretty much a waste of time. I have written about this before. If you would like to have any meaningful discussion, please share your contact details in private message.

witan, presented data is from CGS-CIMB's report dated 20 April 2021, it is not my data. This is specified in the original post itself.

witan, thank you for your comment.

Please note that this article was written on 20 April 2021.

Observatory, thank you once again for your detailed thoughts.

There might be a difference in the time frame we try to incorporate in our approach. This might be one place where a difference in opinions comes from. It is doubtless that headwinds from increased competition will exist in the short- to mid-run. That is why I generally avoid thinking from a short-run perspective (much harder to predict the dynamics).

In this sense, the contradiction regarding some of the assumptions you make might be coming from a shorter time frame you might be looking at. For instance, you both assume that competition from newcomers will increase, and you assume that selling prices will normalize. Both of these assumptions can work together only in the relatively short-run. The US government (and really - most governments) don't have a good track record of aiding industries once an emergency situation is over. For instance, recently US medical mask manufacturers sent protest letters to the US government, because the government encouraged them to open production facilities during the pandemic. Currently, without ongoing government subsidies, they are unable to survive as China floods the market with below-cost (for US manufacturers) products. My expectation is that with the exception of US Medical Glove Company LLC (a company with high-level US Army connections), any meaningful production in the US will largely disappear in the mid-term.

The dynamic will likely play out in a similar fashion in China. My personal expectation is that Intco (and Blue Sail, and smaller Chinese newcomers) will abandon their expansion plans to a large extent - both for nitrile, and for vinyl gloves. My understanding is that selling prices for vinyl gloves have almost normalized at present. In this sense, I understand the assumption of RHB in a different way (although note that I don't necessarily agree with it). Their assumption is that as selling prices go below cost of production for inefficient players, these players will simply cease to exist - which is a correct assumption in the mid-term.

However, I understand that your assumption of normalization of selling prices as early as next year comes from your belief that supply and demand will largely be in equilibrium by that time. You might be underestimating the ongoing excess demand. There are two factors that are unlikely to make that happen so soon:

- The pandemic will largely be far from over in the developing countries by the beginning of 2022. Projections are for India and China to achieve herd immunity vaccination levels by Q3 to Q4 2022, for instance. All the most populous non-North American/European countries (ex-Japan) are not expected to achieve that before Q2 2022.

- Developed countries will be looking at building up strategic stockpiles on an ongoing basis. It has already been reported multiple times, but most recently during the Top Glove analyst briefing, it was mentioned that "rich countries" realized their stockpiles were inadequate, so they will be looking into ways of stockpiling 3 to 6 months worth of PPE post-pandemic.

Regarding the valuation method, you can actually ignore the expansion plan in the case of Supermax. Within the next 2 quarter, the company is not going to be able to utilize much of its expanded capacity anyway. That is why I talked about cash + earnings within the very near term. Even if you assume no capacity growth (thus, take cash at face value), profit margin needs to shrink to below 10% as early as the beginning of 2022 for the present valuation of the company to make sense. I don't like to discuss valuations that the market gives other companies (especially not in other industries) since this is a futile exercise in my view. I don't chase the market since I don't know how to do it. Valuing lowly net cash companies might have a lot more to do with low overall market interest rates (they have been low in Malaysia since the Asian Financial Crisis, and elsewhere in the world since the Global Financial Crisis, a very negative factor macroeconomically), it doesn't necessarily make it right and it doesn't make the risk/reward ratio any lower for high debt companies. On the contrary - since we cannot predict the central banks' moves, high growth/high debt companies are in all the more risk since long-term low interest rates remove the litmus necessary to sift out unproductive debt. That is why even talking about tapering money conjuring (artificially lowering longer term interest rates) has seen severe market "corrections" over the past few years. This is something I am very uncomfortable with, so I won't assume higher risk in my investments just because the market uses a different valuation method than me.

Observatory, as always you are one of the few people who do any actually meaningful critique on investment in gloves. My notes are below:

You seem to assume worst-case scenarios on every aspect of the investment:
- Reversion to mean profit margin soon
- Melting away of expansion plans
- Drop in ASP, with long-term trend towards ASP below (or very near to) cost of production

With such assumptions, investment in a glove business is not viable in any time - not just now. So let's tune it down a little bit and agree to something a little bit more moderate, otherwise there will be no point in having a discussion on the subject as it would mean you would have ruled out the viability of any type of investment in a glove manufacturer as inappropriate (hence making the discussion useless).

There are a couple of problems with your assumptions:

1) You assume that Top Glove's marginal adjustment in the expansion plan in the next 2 years (the adjustment for CY22 is from 146 bil to 138 bil pieces capacity, and the adjustment for CY23 is from 178 bil to 175 bil pieces capacity) is due to the market conditions and not due to the delay of the Hong Kong listing. The justification for that assumption is lacking, because at the same time you contradict yourself. You say that Intco have the necessary capital to continue on with their expansion plan (although it's a lot more questionable if they have any meaningful plan to execute it in the first place), assuming they will. Your conclusion is that Supermax is unlikely to proceed with their expansion plan. In all cases you are assuming the worst-case scenario from the point of view of the Malaysian glove companies, even when your assumptions are potentially mutually exclusive.

2) You assume that ASPs will decrease substantially, and in the long-run they will offer minimal profit margin, premising that on Hartalega's annual report statement. However, at the same time you say that non-efficient players will not be affected as this would be a factor in your quick normalization of ASPs towards a pre-COVID level (as opposed to a level that is simply below the cost of production of non-efficient players). In this case you again contradict yourself as it cannot be both ways, at least not for longer than a relatively short period of time.

My suggestion is that we do the following:

- We assume that the big, and efficient glove manufacturers, will remain aggressive, and that they will proceed with their expansion plans accordingly. This will in turn cause ASPs and margins to be substantially reduced to ~pre-pandemic levels as early as next year.

- We assume that ASPs will normalize at $27.2 for nitrile gloves, and $18.5 for NR latex gloves, as soon as January 1, 2022.

- We assume that Supermax's net profit margin will drop to 15% as soon as January 1, 2022, and after January 1, 2023 it will be down to 10%.

If you assume 90% utilization rate for the entire period, you will see that the current market price of Supermax is still below value. The biggest "problem" (if you are really keen on making gloves seem like a bad investment) is that most of the value is contained in earnings that have already been achieved (net cash) and will be achieved within the next 2 quarters. Beyond that (beyond the end of this year), a lot of mutually exclusive things need to happen to make the investment non-viable.

Brutus, Supermax2020, ks5S, thank you for your comments.

Brutus, a sign of how misinformed the market is, is the fact that these expansions are actually seen as a negative thing. This is the first time I see manufacturing capacity (not raw material production) expansion seen as a negative. It appears that the market thinks literally every business owner investing into medical glove production capacity has no idea what he is doing.

Supermax2020, EPF has been doing that for a while now. Unfortunately, when the price rises just a little bit, they start selling. It is a smart move, because it helps them dampen expectations even as the overall market interest is rather muted. It's a well-executed move to increase their shareholdings of gloves at cheaper price than they should be able to.

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dawchok, thank you for the additional details. Anecdotal information is dangerous to use in situations like these. I remember for instance rumours were spread before last quarter results announcement by Top Glove that the results were going to be very bad. Overall, we can trust the actual financial reports of companies, information they provide during post-report briefings, and information from official related bodies (such as MARGMA for instance).

The economics of each of the players in an industry are different. Manufacturing is almost inevitably a size business, so smaller players struggle more in volatile environment, especially with added competition for limited market share and supplies. That would be my read of the story your friend has told you. I trust that the price has spiked to $130 at some point, which is very likely to have been in December when half of Top Glove's factories were closed, but that has been very temporary and overall inconsequential.

dawchok, thank you for the clarification. However, the math doesn't work. No matter how many months ago, volume of exports cannot have increased more than twice by April (or by today, for instance) to justify a difference of 45% in average selling price, because there simply hasn't been that much capacity expansion.

It is possible that $130 has been a momentary spike, for instance at the time Top Glove's factories were closed. That is not ASP though. Over the past several months, ASPs for Supermax and Top Glove, the companies that raised their selling prices the most, have been in the range of $80 to $100, with ASPs of Kossan and Hartalega slightly lower than that and gradually increasing to the March/April level of ~$80.

With all that being said, it is possible that in March/April selling prices across all Malaysian exporters have peaked, at a little over $80 (average), and they will start gradually going down hereon after. It is possible that ASPs in June will be in the range of US$70+.

dawchok, in this case your information is most certainly wrong, as explained above.

pjseow, thank you for your comment. Note that exports have to double (not merely increase by 40%) to compensate for a 45% drop in ASP (as suggested by dawchok). This is obviously impossible.

CharlesT, thank you for your comment.

My assumption is dawchok is referring to peak spot order prices. As explained in my post with analysis of Supermax's quarterly results, this does not affect the big glove companies as they are servicing standard delivery orders mostly, not spot orders. However, this does very likely affect newcomers, which predominantly rely on spot orders at present.

Just to illustrate why a drop of 45% (from $130 to $70) in ASP is impossible:

- The average rubber glove export value for Q1 2021 (if that's the period dawchok is referring to) was slightly below RM6 billion per month. This means the increase in April is by 12%.

- To compensate for a drop in average selling price of 45%, the export volume would have to had increased by 2.1 times, which is obviously impossible.

The only companies that have reported increased production volumes so far have been Top Glove - by 4 billion pieces, which is about 2.5% increase of total volume for Malaysia. Mah Sing, the only one of the newcomers that keep posting weekly updates on its new production, hasn't shipped a single order yet as far as I understand.

dawchok, thank you for your comment.

Could you let me know what the $130 per 1,000 pieces price represents? Is that the price for spot orders?

At present I have focused my writings on macroeconomics, and in terms of industry - on gloves. I am finding very few other suitable investment assets, in particular in Malaysia.

Thank you everyone for your comments.

pjseow, my calculations on actual ASPs are very similar to yours. I am a little more conservative and I believe for next quarter blended ASP will be between $85 and $90, i.e. approximately flat q-o-q. With no unforeseen closures, and no unannounced donations, that should result in approximately RM2.3b to RM2.5b revenue from sales for the quarter.

Regarding cost of manufacturing in the US, it is undeniable that the costs will be higher, specifically in terms of labour and potentially in terms of raw materials. The question (and why more clarity on the endeavour is needed) is if the incentives will offset the extra operating costs. Additionally, in terms of logistics, the costs will be lower, which would be beneficial to Supermax's OBM business. Natural gas price in the US is competitive, too.

observatory, thank you for your detailed note.

I probably should have made it clearer that while the intrinsic depreciation is undeniable, the method of its unlocking is certainly a matter for debate. I am on the side of believing that it will be unlocked through economic activity, and the savings rate is just one expression/example of it. Velocity of money for instance, as with during every period of major turmoil (in the past usually war), has been grinding to a halt. So it is highly like that the return to normal economic activity is what will unlock inflation.

Unfortunately most observers are focused on jobs data, which in my view can only be a consequence, and not a leading factor of inflation. Traditionally, during war times, a significant part of the labor force was, sadly, dead or incapacitated for a prolonged period of time. That was one of the unlocking factors of inflation. Fortunately, in most countries in the world that dark scenario didn't take place. There are still people who are worried to work certain kind of jobs and that is what might be driving labour shortages in certain segments of the economy, but that is truly transitory as people will return to work once the handouts and the fear of the pandemic ends.

stockraider, that's a lot of text, sometimes really hard to read or follow (it seems like it's a collection of copied texts from somewhere else?).

In any case, the exchange rate of a currency depends on a myriad of factors which in normal times cancel each other out to a large extent, so that the currency exchange rate rarely swings in either direction, except for during major cataclysms. Such a cataclysm is an increase in the money supply to GDP ratio by close to 30%. Another potential cataclysm in the making might be a sharp increase in taxes, which is expected to happen in the US.

The rest of your comments are explained and covered in the two parts of the article.

Imagine333, stockraider, observatory, thank you for your comments.

observatory, I feel like we are running a little bit off-topic again. I explained in the first part of the article why the underlying depreciation of certain currency (among them, chiefly the USD) is unquestionable. You can read it here: https://klse.i3investor.com/blogs/bursainvestments/2021-05-01-story-h1564229949-Debt_Money_Printing_and_Inflation_The_Economics_of_a_Pandemic_Part_1.jsp

If The Fed, or Treasury holders, have positioned/prepared properly for that inflation, or if The Fed is simply trying to calm down the markets, is beyond the point. The real question, which cannot be answered as it is largely politically-related, is when and how quickly the underlying depreciation will get resolved and will start showing up in official statistical data.

You make a very valid point on political risk in Malaysia, which I believe is a more serious problem than a financial crisis as it is isolated to the country itself. However, political risk is by its nature very hard to estimate and predict. There has been a significant amount of depreciation in the value of the MYR over the past several years (since 1MDB), and a significant outflow of foreign investment from the country. My belief is that it would be hard for the process to exacerbate further at this point. A non-elected government has been moving the country through the biggest pandemic in a century after the ruling coalition disbanded. It hardly gets worse than that. Thus, my view is that the downside on the political risk side is generally controllable hereon after.

The real elephant in the room is the aforementioned underlying depreciation in the currencies. I have briefly looked at the figures for other countries, and I can see that as far as money supply expansion goes, Malaysia has been on the very conservative side as compared to most other countries. Thus, I am very comfortable with my MYR denominated holdings so far.

pjseow, thank you for the info. I will try to find it.

pjseow, thank you for your comment.

I found an update note from Nomura, which was very detailed. It features similar information to what you are mentioning from TA's report. You can download it from here: http://www.supermax.com.my/html/filedownload.aspx?file=(1)%20NOMURA%20RPT%20DD%206.5.2021%20BUY%20TP%20RM8.39.PDF

Could you share a link to that Sin Chew article?

Up_down, observatory, arv18, pjseow, thank you for your comments.

observatory, this goes a little bit off-topic, and it might be a matter to be considered in an entirely separate article, but in a nutshell an unwarranted windfall tax is long-term economically a very negative thing. And I am not saying this because I have holdings in some of the glove companies, for instance. I would have said this for tech manufacturing, food processing, or a myriad of other industries that might experience temporary excess profits due to unforeseen events. Such type of taxes stifle and discourage investment as a whole. For a country like Malaysia, which doesn't have plenty of world-leading industries to begin with, such a blow may prove devastating, especially in the face of international competition.

Manufacturing involves a capital intensive, complicated process, in order to add value to produce. Thus, a windfall tax on a manufacturer is not the same as a windfall tax on a commodity. It is even hard to make the case for a utility, although it is a close thing to commodity in its basic form. The reason the UK, for instance, previously imposed a windfall tax on utilities was because of perceived problems during the privatization process (utilities privatized at below market rates), not because of "windfall" profits per se.

arv18, yes, the US venture of Supermax is something that deserves to be discussed in more details. From a purely economic point of view, it certainly doesn't make sense - as doesn't make sense any other manufacturing capacity of nitrile gloves set up in the US by American companies. Without the direct aid of the US government, these businesses cannot remain competitive. The big unknown there is the deal Supermax would be able to cut with the local state governments in terms of incentives, and with the federal government in terms of ongoing commitments. Unfortunately the visibility on both of these topics is so far scarce.

pjseow, yes, these are precisely my thoughts. I am still trying to find the analyst briefing slides. I believe they could shed some light on the matter. So far the short notes I have seen in the updated reports of MIDF and CIMB don't provide a lot of extra details. In any case, I truly doubt that the blended ASP of Supermax will go below the ASP of Harta. It wouldn't make sense if it did.

Up_down, thank you for your comment. This is very interesting. So what you are saying is that their dividend payout comes 1 quarter later every time?

observatory, as always thank you for your detailed comment.

On Supermax, I would still like to receive more precise guidance by the management before commenting on ASP. By the look of the financial statement, the "15-25% decrease" statement might have been related to spot orders as it is practically impossible their blended ASP could have fallen by that much (based on the financials). They have been keeping approximately 10% of their production for spot orders, so the dent is 1.5% to 2.5% of revenue, potentially. But again - these are just assumptions.

On the Chinese companies, Top Glove, and listings on Hong Kong, my thoughts are very similar. I believe one of the reasons Top Glove reduced the amount of shares to be issued for HKEX because the interest was not as robust as initially expected. As you mention, contrary to what most people might think, this is likely good news, because it means Intco won't be able to raise the funds they so much need urgently at elevated price.

In any case, the Chinese players operate in a more suitable environment currently than the Malaysian players - that is evident. China has managed to control the pandemic, while Malaysian players have had significant disruptions to their operations due to outbreaks in their factories. There is no talk of windfall taxes in China (at least none that I have heard of), while one of the most prominent economists in Malaysia apparently continues to support the idea vis-a-vis Malaysian manufacturers. From what I gather, Sri Trang enjoys significant tax breaks to its operations in Thailand, too.

arv18, thank you for your comments. I am sure you mean well even though it doesn't come across this way.

You are making a lot of assumptions, so to make it easier below are some clarifications:

- I have mentioned elsewhere that I've started observing Bursa not long ago, and before that it wasn't a market I was interested in. Thus, yes, you can say I am "green" when it comes to Bursa. I am interested to learn nevertheless.

- My articles have so far focused on macroeconomic issues and on gloves, because the forum is focused on Malaysian investments, and my opinion based on macroeconomic assessment leads me to be interested at this time specifically in glove stocks in Malaysia. That doesn't mean this would be the case moving forward. In fact, I hope it wouldn't be so.

- I avoid sharing publicly buy/sell transactions as this may trigger others to follow me, when they might not need to, or worse - when it's not good for them. All I am sharing is information and analysis. I do that because I hope it would lead to constructive discussions, and that has indeed happened a few times so far. Additionally I believe in giving in order to receive, so my hope is that more people will share their analyses or information they might have come across - as happens occasionally here in the forum. In a nutshell, my posts are not meant to be buy/sell calls or at all associated with trade recommendations. That is why I don't share publicly my investment decisions or strategies as I execute them. I would be happy to meet up for a coffee once the pandemic eases up and to exchange ideas in person though.

- I know that a certain number of people are reading my posts. Most of the time my posts are in response to someone asking me a question or me seeing a question asked by many different people. So please don't accept my posts as the work of obsessive hyperactivity, they are just a response to questions being asked and me trying to figure out the answers (which may sometimes be wrong, of course). My stances on the companies I write about have not changed since I started writing this blog about 6 months ago as nothing has fundamentally changed. That doesn't mean that I am not interested in observing how their stories develop.

- I have mentioned previously when you have made similar assumptions that I have never bought stock on margin, I likely never will, and I don't recommend the use of leverage for investment to anyone.

Kyou, batman666, Jack Khan, CharlesT, abang_misai, Foker, thank you for your comments.

Please note that this was just a simplistic model, which evidently proved ineffective in this case. Note that there are two adjustments that might need to be made:

- Supermax donated RM75 million worth of gloves to the Malaysian government, which cannot be captured by the model and is unpredictable.

- Even in the "worst" case described in my post, and when factoring in the donation, there is still approximately RM10 billion in exports that is unexplained. There might have been enormous items coming from newly commissioned lines of newcomers, for instance, or there could have been a blowout month of March for Top Glove.

Either case, the difference is very significant and we will have to wait for more announcements in the coming months to see where it might have come from.

CharlesT, trueinvestor, pjseow, thank you for your comments.

pjseow, we are running a bit off-topic (I may indeed write that article on Harta), but just to confirm - elsewhere I wrote about this, and about the fact that their inventories have increased by almost RM300 million q-o-q. That was not my point when I pointed to the lukewarm quarter. My point was that based on my simple model explained in this article, as Harta reported lower than expected revenue from sales, and as exports of gloves have increased by more than expected, the gap (i.e. the difference in these expectations) must have come from somewhere, and the most likely "culprit" would be Supermax.

pjseow, Brutus, thank you for your comments.

pjseow, yes, it does seem like scenario 2 is the "average" case. My assumption for net profit margin would be a bit lower though. This is probably a good time to mention that before yesterday my estimate for Supermax's quarterly results was significantly lower based on previous guidance by the company. However, with Harta's "lukewarm" results and the exports figures showing a significant increase m-o-m and q-o-q, it is hard to explain the difference in any other way. The second liners don't have the capacity to cover a big part of the gap.

Brutus, I don't like to talk bad about companies, so I have not been writing much about the second liners. They are 3 very different businesses, and while some will likely do better than others in the future, my personal expectation is that (most of) the big boys will do best overall.

LimitUp, speakup, thank you for your comments.

speakup, as the healthcare system in certain states is currently flooded and running at close to 100% capacity, I don't think anything other than a tightening of restrictions is possible to be honest. The real question is how much tightening will be imposed, and if that amount of tightening will have the needed effect. Based on today's announcement, I am not too optimistic.

treack, thank you for your comment.

Harta released their investor presentation. According to the slides, their sales volume for the quarter was 6.7 billion pieces. That makes ASP of RM343 ($83) for the quarter. Last quarter their ASP was RM224 ($55). That's an increase of 50% q-o-q.

sanjanx, thank you for your comment. I am not a student for quite some time now, but I have an academic background in Economics, yes.

calvintaneng, thank you for your response. Why do you believe FGV will do better than, say, Sri Trang Agro?

Lukey_Greek, calvintaneng, thank you for your comments.

calvintaneng, wouldn't it make more sense then to go for a more pure play rubber plantation counter such as Sri Trang?

speakup, Sales, Citadel9999, thank you for your comments.

While I agree with you, just a note that even if a company has a lot of cash, we have to see what it would do with it and how it would/could utilize it. Of course in the case of (most) Malaysian glove manufacturers, it may be relatively simple to calculate the excess cash that could potentially be distributed to shareholders.

I will give Supermax and Top Glove as examples.


Top Glove

1. Cash within next 5 years: RM28 billion
- Cash on hand = RM4 billion
- Estimated raised on HKEX = RM4.2 billion
- Estimated net profit 2HFY21 = RM7 billion (70% dividend)
- Estimated net profit FY22 = RM5.8 billion (50% dividend)
- Estimated net profit FY23 = RM3.1 billion (50% dividend)
- Estimated net profit FY24 = RM2.3 billion (50% dividend)
- Estimated net profit FY25 = RM1.6 billion (50% dividend)

2. Total announced capex = RM10 billion

That's approximately RM14 billion leftover for dividend payouts. Of this, the confirmed payout, based on the special dividend of 20% for FY21 and on the company's 50% dividend payout policy, is RM11.3 billion. There will be estimated of RM2.7 billion unallocated funds, which I believe could be distributed as special dividend. For instance, if extra 20% dividend is distributed for FY22 to FY25 (i.e. the dividend payout for the next 4 financial years is 70%), that would be RM2.56 billion - close to the leftover.


Supermax

1. Cash within next 5 years: RM13.85 billion

- Cash on hand = RM3.6 billion
- Estimated net profit CY21 = RM4.9 billion
- Estimated net profit CY22 = RM3 billion
- Estimated net profit CY23 = RM1.4 billion
- Estimated net profit CY24 = RM0.5 billion
- Estimated net profit CY25 = RM0.45 billion

2. Total announced capex = RM3.6 billion
- Malaysian factories = RM1.39 billion
- US factory = RM2.2 billion

That's approximately RM10.25 billion leftover for dividend payouts. In fact, the company can cover its announced capex with the cash on hand it has, and any future profits can be distributed as dividend fully. The company doesn't have a dividend payout policy though.

gohkimhock, Foker, zzzz52, thank you for your comments.

gohkimhock your question is answered in the report by Impactt I linked to in the article.

Foker, in some of the recent media reports, all of the companies with operations in Malaysia (including Ansell) I have mentioned in the article above, were given as examples of having labour issues.

Jonathan Keung, i3lurker, thank you for your comments.

Unfortunately, in general [****] is a fundamentally inefficient stock market. I have briefly mentioned some of the reasons for that before:

- Imperfect information and information asymmetry - lack of or poor quality information, and/or insider information exploitation;

- Educatedness of market participants and, more importantly, lack of suitable educational opportunities;

- Number of market participants and concentration of capital - with the outflow of foreign investors, and the difficult access for foreign retail investors to the market, this problem is exacerbated.

Note that when I say that the market is inefficient, I in no way want to offend any of the market participants. On the contrary, market participants adjust to the conditions in which they operate. When the conditions are suboptimal, market participants, based on their mandates and positions, usually operate suboptimally, too.

I don't necessarily think this inefficiency shows up particularly with the CPO/plantation niche though.

LimitUp, i3lurker, ezmoney, thank you for your comments.

ezmoney, that would be the fastest way to get it, although it frequently gets shared in groups and chats a little later, too. I believe you could even find it uploaded on i3 sometimes.