https://rfs.cgs-cimb.com/api/download?file=36500E1A-41C3-41FA-945E-49197D908C75

Stock in focus: Rubberex Corporation (RBRX MK)
Sector: Rubber gloves - Thematic idea to ride surge in global demand of gloves from Covid-19 pandemic
Recommendation: N/A (Currently trading at 15.9x CY19 P/E, a 60% discount to weighted CY19 P/E of the Malaysian glove sector of 39.8x. This has yet to account for any earnings growth from its capacity expansion plans)

Introduction
Rubberex Corporation (RCB) is a main-market Shariah complaint glove maker that is located in Ipoh, Perak, Malaysia. It was traditionally a household and industrial glove maker, before venturing into production of nitrile disposable gloves in end-2014 (current capacity of 1bn pieces p.a.). It was previously involved in production of vinyl glove in China prior to the disposal of this business in 2017 due to a competitive operating environment.

Why should you look into Rubberex?
1. The group expects to commission its new nitrile glove plant by 2H20, which will increase its nitrile glove capacity by 150% to 2.5bn from 1bn currently. On top of that, it is in the midst of securing a new land to build another glove plant which will increase its total nitrile disposable glove capacity by five-fold to 5bn p.a (from 1bn currently) by end-2023F.
2. RCB is confident of selling its gloves (>90% are exported), premised on various factors.
a. It targets a very niche market, which is retail-based clients (supermarkets, hypermarkets and etc) whose orders and prices are much ‘stickier’ than medical based customers. This is given that RCB will have to products for them which have more customized packaging design, quantity and etc.
b. RCB can leverage on its existing customer base which it was previously serving from its China operations prior the disposal. We gather that these clients are actively looking for new suppliers out of China, which RCB has an existing working relationship.
c. It currently sits on an order backlog of 4 months from its existing customers alone. Note that, RCB is very strong in the European markets particularly Spain which its largest customers is a supermarket chain operator there. Management is very confident of filling at the very least 50% of the new capacity once the new lines are commissioned
d. This has yet to be coupled with better demand moving forward from higher healthcare awareness from the ongoing Covid-19 pandemic (most European countries currently have low glove consumption per capita).

Earnings outlook - This is a simple back of the envelope analysis - Not a guidance!
In FY19, the nitrile glove segment contributed PBT of RM5.9m (out of total FY19 PBT of RM14.2m). Assuming that contribution from household and industrial glove contribution remains flat at RM8.3m (FY19), the increase in nitrile glove capacity of 1.5x in 2H20 (expected total PBT of RM14.8m – RM5.9m x 2.5) should lead to total PBT of RM23.1m. Inputting a 23% tax rate, CY21 PAT would come in at RM17.5m.
This indicates that this glove stock could be trading at 10x CY21 P/E. We believe this is a very conservative view, given that our calculations are assuming no margin expansion from: i) a surge in demand for gloves worldwide, ii) more favorable operating environment (YTD decline in both ringgit vs US$ and lower raw material prices), iii) better economies of scale as well as higher operating efficiencies from its new production lines.

Balance sheet
RCB currently sits on a net cash position of RM44m as at end-FY12/19. This is post spending RM70m to build the new 1.5bn nitrile glove plant that will commence in 2H20. Hence, we think the company has no issue in gearing up to build a land to build a new 2.5bn glove plant.

http://www.bursamalaysia.com/market/listed-companies/company-announcements/6257953

https://www.theedgemarkets.com/article/tnb-has-replaced-212639-street-light-bulbs-led-lights

excluding adoption from seven eleven suppliers

just imagine RM10k profit per store x 2,323 = RM23.23 million profit

https://www.bharian.com.my/bisnes/korporat/2019/06/576634/7-eleven-berpotensi-buka-5000-cawangan

https://themalaysianreserve.com/2019/06/21/7-eleven-to-implement-ax-retail-b2b/

https://www.theedgemarkets.com/article/7eleven-use-radian-globaltechs-retail-management-portal-ax-retail-b2b

https://www.thesundaily.my/business/7-eleven-collaborates-with-radiant-globaltech-for-b2b-portal-XD1005808

SSM check reveals Luen Heng assets of RM230 million and profit of more than RM10 mil

https://carlsberggroup.com/who-we-are/about-the-carlsberg-group/global-presence/malaysia/

Good news. SUBSIDIARY OF CARLSBERG! big F&B / consumer player.

http://www.bursamalaysia.com/market/listed-companies/company-announcements/6161813

http://www.bursamalaysia.com/market/listed-companies/company-announcements/5926025

CIMB increased their TP to RM1.26

https://brokingrfs.cimb.com/UN3EUsrmCRABq6grboC6NVjKoP1o1O5NykXnbYrumezuBdg7yc1ws7PYMRnSr1PWUP4-TRPuqB7RKMa00.pdf

CIMB increased their TP to RM1.26

https://brokingrfs.cimb.com/UN3EUsrmCRABq6grboC6NVjKoP1o1O5NykXnbYrumezuBdg7yc1ws7PYMRnSr1PWUP4-TRPuqB7RKMa00.pdf

CIMB increased their TP to RM1.26

https://brokingrfs.cimb.com/UN3EUsrmCRABq6grboC6NVjKoP1o1O5NykXnbYrumezuBdg7yc1ws7PYMRnSr1PWUP4-TRPuqB7RKMa00.pdf

CIMB increased the TP to RM1.26

https://brokingrfs.cimb.com/UN3EUsrmCRABq6grboC6NVjKoP1o1O5NykXnbYrumezuBdg7yc1ws7PYMRnSr1PWUP4-TRPuqB7RKMa00.pdf

the 60% acquisition of TWS will contribute RM6 million to AWC's PATMI - roughly a 30% increase and will bring the FY19 EPS to around 10c per share.

at a PE of 12x, AWC's fair value is RM1.20. plenty of upside from the current price.

AWC has a current orderbook of around RM1 billion + TWS orderbook of around RM120 million.

This will provide earnings visibility for the next 3 years. Remember, AWC is a concession stock and should trade much higher that 12x PE.

Lastly, market talk is that there is a huge announcement around the corner. Stay tuned peeps