All fund managers selling now and buy back at RM1.00

JP Morgan slashes TP for glove makers to pre-Covid levels, warns market underestimating ASP bottoming risk

KUALA LUMPUR (Nov 17): JP Morgan which has been bearish on the glove sector since last year, has once again slashed its target price (TP) for Top Glove Corp Bhd to RM1.50 — a 67.33% discount from its current price of RM2.51 — while maintaining an “underweight” rating.

In a note, JP Morgan said the market is underestimating the potential impact of the bottoming gloves average selling price (ASP) and the shift in pricing power back to the buyers.


The note also covered Hartalega Holdings Bhd and Kossan Rubber Industries Bhd. JP Morgan gave an “underweight” rating and a fair value of RM4.00 to Hartalega, 36.25% lower than its current price of RM5.45 while Kossan’s rating was “neutral” and its fair value is pegged at RM2.00, down 3.5% from its current price of RM2.07.

Notably, these TPs are similar to the glove makers’ share prices before the global Covid-19 outbreak.

JP Morgan analysts Jeffrey Ng and Sean Teo said the operating margin per unit (OPM) from the latest results briefings from the Malaysian glove makers might fall below pre-Covid-19 levels despite earlier estimates forecasting a better-than-pre-Covid-19 OPM.


“The industry is still finding [its] bottom. Note that glove ASP has dropped from US$115 in Feb-21 to today’s US$28-$30. It is now clear that glove ASP has reverted to a cost-plus basis. Channel checks indicate that current OPM is already nearing pre-Covid-19 margins. But the main question is will margins compress below pre-Covid-19 levels due to intensified competition from China? The risks are tilted toward the downside and the market, in our view, has not fully discounted this risk,” the analysts wrote.

They also cut the OPM assumptions by 20%-30% similar to pre-Covid-19 margins of US$2.4-5 and said that the glove makers will see a mean reversion and trade at their respective historical trading ranges of 13-18 times earnings unless a price war happens.


JP Morgan noted that Kossan’s modest expansion plans and its net cash as of September 2021 stood at RM2.4 billion which makes up 38% of its market capitalisation and is expected to improve to 39% in FY22.

Top Glove and Hartalega, however, have a latest quarterly net cash of 3% and 22% respectively against their market capitalisation of RM20.6 billion and RM18.37 billion.

The analysts cautioned that ambitious expansion plans would limit the future growth of the glove makers’ net cash position.

Meanwhile, JP Morgan said Malaysian glove makers’ best days are over as Covid-19 testing — which drove demand for rubber gloves and caused supply tightness — has peaked and glove demand and prices will decelerate and normalize thereafter.


In particular, the analyst believes that Top Glove and Hartalega’s balance sheet management is suboptimal for creating shareholder value due to the persistence in dividend payouts and funding their increasing capex for more production capacity with equity which has a higher cost compared to debt.

“Despite the strong cash flow generation, the company has maintained its dividend payout at 50%, but plans to increase capex to 4x its historical average. Utilizing equity at a cost of 7.7% vs the cost of debt of <5% in funding capex, in our view, is not optimal for shareholder value creation,” the analysts wrote of Top Glove.

Top Glove’s peer Hartalega had also said that it will increase its capex by 2.3 times in the next three years, compared with its financial year ended March 31, 2017 (FY17) to FY19.


“We believe Hartalega could unlock more value if it utilizes its debt to fund its capex as its cost of equity of 7.8% is higher than its cost of debt of 2.5%. However, Hartalega has stated it will maintain its 60% dividend payout despite the supernormal cycle and deploy cash instead of tapping debt to fund its capex,” the analysts said.

Kossan, on the other hand, has a fairly muted capex despite a strong cash generation during the glove supercycle. As it has been trading at a discount to its peers due to its smaller size and lower margins and is no longer in large funds’ top-10 holdings according to JP Morgan’s proprietary domestic fund fact sheet analysis.

JP Morgan also outlined risks to its bearish sector call which includes a sharp cut in planned capacity expansion which reduces price competition risk, and unexpected changes in nitrile and natural rubber prices which could uplift glove prices from their current lows.

Further challenges to its sector call would be a consistent step-up in dividend payout and balance sheet management, a substantial depreciation of the ringgit that would improve profits as gloves are sold in US dollar terms.

The exit of new entrants cutting oversupply risk and unforeseeable factors driving a valuation re-rating could also see glove makers’ prices move upwards too, the analysts said.

Topglov result expect to making loss in next few Q. Now just begining of worst case.

All research house downgraded Topglov to sell, target price RM1.00.

Dun said i no told u

Alibaba will be super booster to Dnex share price to RM1.50.

wait for the announcement. Alibaba now enters Dnex.

Alibaba take up the Dnex private placement.

LIMIT UP

going to suspend soon pending major announcement.

Offer price RM1.80 ?

JCorp and TPG in shelved KPJ Healthcare privatisation bid?

A plan to privatise KPJ Healthcare Bhd by its largest shareholder Johor Corp (JCorp) had been in the works but has been shelved for now owing to the Covid-19 pandemic. The plan involved JCorp partnering global private equity fund TPG, say people with knowledge of the matter.

In early 2020, JCorp was considering its options for its investment in KPJ Healthcare and was looking at proposals from investors and bankers. It eventually decided to take the private hospital operator off Bursa Malaysia jointly with TPG, they add.

“There was a plan that was put into action to take KPJ Healthcare private early last year, and they were going to do it with the help of TPG. However, the plan was shelved due to the Covid-19 pandemic,” says a source.

This is not the first time that JCorp has opted to work with a private equity fund. In December 2011, the Johor state-owned investment company partnered with CVC Capital Partners to take QSR Brands Bhd and its subsidiary KFC Holdings (M) Bhd private.

Questions sent to JCorp on the privatisation of KPJ Healthcare were unanswered as at press time.

Any privatisation offer must ensure that JCorp will hold the majority stake in the privatised company, the people say. This is because KPJ Healthcare is one of JCorp’s most valuable investments apart from QSR and KFC.

JCorp’s stake in KPJ Healthcare is held by Capaian Aspirasi Sdn Bhd. Through the company, it owns 44.2% of KPJ Healthcare, which at last Friday’s closing price of RM1.02 is worth RM2 billion.

It also has interest held via an Islamic trust, through Waqaf An Nur Corp Bhd.



In the first quarter ended March 31, 2021 (1QFY2021), KPJ Healthcare’s net profit declined 62.4% to RM15.24 million, owing to a fall in revenue as a result of lower patient numbers. The group recorded 712,547 patients in 1QFY2021, compared with 743,970 patients in the same quarter in 2020.

During the quarter, KPJ Healthcare’s earnings before interest, taxes, depreciation and amortisation (Ebitda) declined 18% year on year to RM125.8 million, while its profit before tax (PBT) plunged 63% to RM20.2 million.

The sharper decline in PBT was due to fixed costs remaining constant in the quarter, despite the group registering lower revenue and Ebitda.

The Covid-19 pandemic and the various Movement Control Orders (MCOs) affected KPJ Healthcare’s operations, with its bed occupancy rate (BOR) in 1QFY2021 plunging to 39%, from 65% in the corresponding quarter last year.

Owing to the extended MCOs this year, KPJ Healthcare’s BOR has continued to remain low. In May, the rate was just around 38%. Analysts expect it to have remained low in the second quarter of the year, with the reimplementation of the MCO.

Despite the low BOR, KPJ Healthcare still has to cover its fixed costs, which include staff costs, depreciation and amortisation and finance costs.

Over the past one year, the company’s share price has risen about 27.2% to last Friday’s close of RM1.02.

At this price, if JCorp were to take over KPJ Healthcare, it would have to fork out at least RM2.2 billion, which should not pose a problem for JCorp if it partners TPG, as the latter has US$96 billion (RM404 billion) worth of assets under management.

According to TPG’s website, it has invested a total of US$11.5 billion in healthcare, of which US$7.4 billion was invested in the past decade. Its investments in the sector range from pharmaceutical companies to technology and data providers.

According to sources, TPG plans to build a regional chain of primary healthcare hospitals through the tie-up with KPJ Healthcare. The KPJ chain of 28 hospitals in Malaysa would complement the Columbia Asia Hospital chain that TPG acquired in September 2019 together with the Hong Leong group for US$1.2 billion.

The Hong Leong Group and TPG joint venture acquired 17 Columbia Asia hospitals and one clinic in a transaction touted as one of the largest in the healthcare space in recent years. It involved Columba Asia’s 12 hospitals in Malaysia, three in Indonesia and two in Vietnam. Columbia Asia’s 11 hospitals in India were not part of the deal.

Last month, Singapore’s sovereign wealth fund GIC Pte Ltd signed a deal with Sunway Bhd to acquire a 16% stake in Sunway Healthcare Holdings Sdn Bhd for RM750 million. There is a plan for Sunway and GIC to list Sunway Healthcare in the next six to eight years. The deal values Sunway Healthcare, which currently has just two hospitals, at RM4.69 billion.

The deal will announce very soon.

Yap. I heard this rumour of privatisation also. Offer price around RM1.80 wow.

https://www.sinchew.com.my/content/content_2499251.html

I NO GOING TO BUY AT CURRENT PRICE. RISK TOO HIGH.

PERTAMA WILL BE PN17 IF BURSA MALAYSIA REJECT ITS APPEAL. BECAREFUL.

PERTAMA - PN17 SOON ?

OTHERS PERTAMA DIGITAL BERHAD (FORMERLY KNOWN AS SINOTOP HOLDINGS BERHAD) ("PERTAMA" OR "THE COMPANY") APPEAL ON DECISION ON APPLICATION FOR A WAIVER FROM CLASSIFYING THE COMPANY AS AN AFFECTED LISTED ISSUER PURSUANT TO PARAGRAPH 8.03A OF THE MAIN MARKET LISTING REQUIREMENTS OF BURSA MALAYSIA SECURITIES BERHAD ("LISTING REQUIREMENTS") POST THE FOREIGN ASSETS DISPOSAL ("WAIVER APPLICATION")

JCY is hopeless stock. No worth to buy.

Anyone know it take how long to process the upliftment PN17 application ? MAA submit application on 24 Nov 2020. Now already almost 4 months.

The Company had, on 6 November 2020, announced that Bursa Securities had vide its letter dated 6 November 2020, granted an extension of time of up to 30 April 2021 to submit the Plan to the regulatory authorities.

Further the Company had, on 24 November 2020, announced that an application has been made to Bursa Securities on 24 November 2020 in relation to a waiver from having to comply with Paragraph 8.04 and Practice Note 17 of the Listing Requirements. MAAG will make the necessary announcements in due course if there are further developments in relation to the said application.

This announcement is dated 1 March 2021.

no looking good. i sold all at 0.32, wait buy back at 0.25.

Sell when got chance. Dun greedy

Boss already selling their shares since last 2 days. Boss already laugh all the way to bank, left many ppls still dreaming it fly to 50sen. So pity.

Many ppls still dreaming there.

Walao. Many retailers kena con to buy this con stock. Sure will drop back to below 10sen.

QR will out this week which expect loss making again. Share price jump down. Better beware.

Better take profit on Tawin. Big drop expect coming soon.

Tawin rise too much and too fast. Time to consolidation. Support level 25-28sen. Dun chase high, buy at dip.

Super good news ! Will it limit up this afternoon ?

All good news already out. Sell on news.

I think today profit taking will kick in. Better sell now.

Syed Mokhtar going to privatise it ?

real rebound or fake one ?

many small investors loss alots in Topglov. they expect to celebrate the CNY with big angpao now their wish is gone.

ikan bilis cannot fight with big shark la.

MKLAND looking good. 30sen no problem !

Pray TAWIN can break 24sen today.

kukuman. i pm u le. please check

Tawin venture into glove business ? Kukuman is it true ?

Tawin rebound liao. Kukuman said good news on 14 Dec 2020.

kukuman. what happen on 14 Dec 2020 ?

kukuman. Tawin got any good news ? willing to share ?

KPS only suitable for mid term and long term play. It can generate higher return than FD.

KPS lastest QR will extremely good. Price break 90sen.

Pinepac is one of the cheapest plantation stock with net cash RM124 Million on hand. Will company pay special dividend or bonus issue ?

Pinepac looking good to reach 80sen.

Anyone know why Pinepac suddenly up ?

This Pinepac got alots of cash RM124 million. Zero Debts.

Prolexus director keep selling in market. It not a good sign. Please caution.