Bursa Malaysia (KLSE) Stock Investment Portal

ASP Uptrend Intact
Sector Update
Maintain OVERWEIGHT on sector, with Top Glove (TOPG MK, BUY, TP: MYR28.88) as our Top Pick. Global gloves shortages has worsened as COVID-19 cases in US surged 24% month-to-date. For all five gloves stocks that we cover, we raise our earnings estimates and TP due to higher ASPs assumptions. Our Top Pick is Top Glove due to its superior market cap/liquidity and its ability to raise ASP more than peers.

Top Glove (TOPG MK, BUY, TP: MYR28.88)
ASP Uptrend Continues
Company Update
Keep BUY with higher DCF-derived MYR28.88 TP from MYR24.80, 20% upside and 1% yield. Gloves shortages has worsened as COVID-19 cases in US surged 24% month-to-date. We raise our earnings estimates and TP due to higher ASPs. Our new TP reflects 33.5x FY21F P/E (+1.8SD to the 5-year mean). The premium is justified due to its status as the biggest gloves producer globally and its ability to raise ASP more than peers.

Hartalega (HART MK, BUY, TP: MYR21.60)
ASP Uptrend Intact
Company Update
Maintain BUY with higher DCF-derived MYR21.60 TP from MYR19.00, 21% upside and 1% yield. Gloves shortages has worsened as COVID-19 cases in US surged 24% month-to-date. We increase our earnings estimates and TP due to higher ASP. Our TP reflects 44.9x CY21F P/E or +1.6SD above its 5-year mean valuation. The premium is justified due to its highest exposure (96%) to nitrile gloves which command better ASP.

Supermax (SUCB MK, BUY, TP: MYR18.88)
Steeper ASP Increase At Distribution Level
Company Update
Keep BUY with higher DCF-derived MYR18.88 TP from MYR13.88, 18% upside and 1% yield. Gloves shortages has worsened as COVID-19 cases in US surged 24% month-to-date. We increase our earnings estimates and TP due to higher ASP. As Supermax has its own distribution channel in US, we expect its earnings to outperform peers. Our new TP reflects 27.5x FY21F P/E. This is at 23% discount against sector average due to its smaller market cap/ liquidity.

Comfort Gloves (CG MK, BUY, TP: MYR4.80)
A Rising ASP Lifts All Boats
Company Update
Upgrade to BUY with new TP of MYR4.80 from MYR3.18, 40% upside with c. 1% yield. Gloves shortages has worsened as COVID-19 cases in US surged 24% month-to-date. We increase our earnings estimates and TP due to higher ASP. Our TP is based on CY21F P/E of 25x – 30% discount against peers average. This is to reflect its smaller market cap/liquidity to peers. BUY for its FY21 earnings growth of 128% supported by 10% ASP increase and 14% capacity
expansion.

Kossan (KRI MK, BUY, TP: MYR15.50)
Factoring In Higher ASP
Company Update
Keep BUY with DCF-derived TP of MYR15.50 from MYR13.00, 22% upside plus c.1% yield. Gloves shortages has worsened as COVID-19 cases in US surged 24% month-to-date. We increase our earnings estimates and TP due to higher ASP. Our TP implies a FY21F P/E of 31.3x or 13% discount against sector average forward P/E. This is justified due to its smaller market cap and lower liquidity.

Sources :RHB Research