Posted by Diamond7 > 2020-12-19 10:53 | Report Abuse

Well said!

Posted by Goldberg > 2020-12-19 11:46 | Report Abuse

g @ Agjl- Fully agree with your comment posted in Supermax forum.


I find that our fren’s write out is full of flaws and with too simplistic assumptions...without taking into considerations of various variable and invariable factors in a business world....i would not go into it as if i m an expert. I will leave it to all of u to read and judge for yourself.
19/12/2020 11:45 AM

Posted by Goldberg > 2020-12-19 11:53 | Report Abuse

@moshi20's- fully agree with your comment posted in Supermax forum.

@sslee do you take into consideration that for manufacturing sector when certain cost is cover when the volume hit certain number, for every piece of products the factory produce the profit is much higher in comparison to the profit of the product before that? The higher profit margin could be due to the maximize of the production capacity also?

https://www.theedgemarkets.com/article/asp-nitrile-gloves-grow-30-octo...
The group's ASP for nitrile gloves in its fourth quarter ended Aug 31, 2020 (4QFY20) has more than doubled (103%) from 3QFY20, while on a year-to-year basis, it has increased by 114%. The ASP for nitrile gloves for FY20 as a whole is up 31% from FY19's.

The price of gloves didn't raise 10X as you claim to be. While the prices increase, the raw material cost also increases, is it not normal for manufacturing line to factor in this?

Posted by Sslee > 2020-12-19 13:03 | Report Abuse

A normal profit growth is by capacity increase thus sales increase, revenue increase and net profit increase but NP margin stay almost the same.

Under unnormal condition like covid-19 where demand spike and fear of shortage causing buying frenzy and price increase thus revenue increase, net profit increase drastically because NP margin increase by many folds

The 3X or 10X is an ethical question of how much the selling price allowed to increase before the question of taking advantage of a situation to make excessive or unfair profit arise?

The next question is what will be the NP margin once the demand spike by covid 19 is over and with the increase capacity and many newcomers joining the game?

Posted by calvintaneng > 2020-12-19 17:14 |

Post removed.Why?

Posted by information > 2020-12-19 17:28 | Report Abuse

Apart from demand, three other factors do not favour the glove manufacturers at the moment. Firstly, it is labour intensive and after the recent brouhaha, wages and living conditions have to improve if the companies want to continue exporting their products to developed countries. Both wages and living conditions are sticky and will not come down even if prices drop.

Secondly, the dollar is on a dive. It is nearing a seven-year low against the ringgit, which does not bode well for the profitability of the glove companies. The US is going to print more money to reflate the economy, pointing to weaker dollar ahead.

Thirdly, Bursa Malaysia has allowed for regulated short selling (RSS) from January, which is just two weeks away. All major glove players are under the RSS list, which means that it can be shorted if sentiments are not in their favour.

The sector attracted institutional funds in May and June this year when it became evident that glove makers were going to report healthy earnings. Not investing in these stocks would have resulted in the funds under-performing the market.

But now the funds are leaving the sector as indicated in several research reports. Glove producers are professing that the game is not over yet but the smart money thinks the fairy tale run has come to an end.

Posted by information > 2020-12-19 17:29 | Report Abuse

https://www.klsescreener.com/v2/news/view/768399/shed-some-tears-for-gloves

Posted by Sslee > 2020-12-19 19:18 | Report Abuse

Dear Calvintaneng,
You have not answer the part what should be NP margin %?

Posted by Goldberg > 2020-12-19 20:34 | Report Abuse

Spot on Calvin Tan
-------------------
calvintaneng he next question is what will be the NP margin once the demand spike by covid 19 is over and with the increase capacity and many newcomers joining the game?
19/12/2020 1:03 PM

Good question

My answers:

1) Many new comers are of little threat to established Medical Glove players

Unlike other consumer goods Medical Gloves are a Class on its own

No Surgeons/ Top Doctors will simply use "new gloves" from unproven, untested sources

THEY CANNOT TAKE THE RISK AS IT WILL BE TOO DANGEROUS TO THEMSELVES AS WELL AS THEIR PATIENTS

SO THEY WILL STILL STICK WITH PROVEN GLOVE COMPANY LIKE KOSSAN

2) WHY KOSSAN?

Because KOSSAN IS MORE LOYAL TO ITS FAITHFUL LONG TERM CUSTOMERS & DID NOT SIMPLY RAISE ASP PRICES

SO YOU CAN SEE KOSSAN PROFIT TRALED BEHIND OTHERS. NOW KOSSAN HAS PROVEN TO BE THE PRODUCT OF HIGHEST QUALITY WITH CLEANROOM GLOVES & CLEANROOM FACEMASKS

https://kossan.com.my/products/cleanroom/cleanroom.html

AND KOSSAN HAS FINALLY INCREASED ASP PRICES DUE TO ESCALATING COST OF MATERIAL
(RISING GLOVE CHEMICAL ALSO GOOD FOR LUXCHEM AS WELL)

SO KOSSAN SHOULD PLAY CATCH UP

3) WHAT ABOUT ALL THE NEW GLOVE WANNABEES?

TOPGLOVE BOSS ALREADY STATED THAT OUT OF 250 MEDICAL GLOVE COMPANIES 80% HAVE FAILED AND CLOSED SHOP - ONLY 50 REMAINING

SO CAN EXPECT 80% TO EVEN 95% OF NEW GLOVE WANNABEES TO FAIL LATER

THE 5% THAT DID NOT FAIL MIGHT SELL ITS OPERATIONS TO BIG GLOVE COMPANIES BECAUSE OF ECONOMY OF SCALE

APLI SOLD TO SUPERMAX

ADVENTA SOLD ITS MEDICAL GLOVE ARM TO TOP GLOVE

SO STAY INVESTED ONLY IN PROVEN GLOVE COMPANIES ESPECIALLY KOSSAN

Posted by Goldberg > 2020-12-19 20:54 | Report Abuse

This is an interesting analysis on SUPER max- and not those half baked ones.


https://messenger.i3investor.com/res/msg/file/27922/2020/12/supermax_analysis_20201219153604.pdf

Posted by Sslee > 2020-12-19 21:21 | Report Abuse

Haha forget about all the analysis because the profit growth is due to abnomal situation as a result of covid-19 pandemic.

Just answer a simple question what should be a reanonable and fair NP margin for glove sector?

Note: Before covid 19 the NP margin is abt 7-15% and last quarter it is 34-60%.

Posted by wkc5657 > 2020-12-19 22:03 | Report Abuse

Sslee

You wrote :
"...but there is a certain limit or red line of exploitation and profiteer behaviors that we should be ashamed of."

In a capitalistic society, there is no need to be ashamed of profits as long as the markets are willing to pay for it. The holy grail of business owners when the business dictates the price not the market.

The social media company stocks, margin consistently high all these while, yet still exploiting every possible avenue of monetising user data....

The big software companies like microsoft where their products pretty much becomes a basic need for society to function, do check their margins also...

apple, quite a scorn to a significant portion of people, and i don't deny they have certain unique selling point, but see their sky high margins compare to their main contractors'....do they feel ashamed to try to squeeze them a little more or give them a little more slack so they can pay their workers better/provide better working environment? No...the bidding is a race to the bottom...and how long have apple been doing this?

More recently, pfizer/moderna, taking in so much public money to develop an effective vaccine, yet still have the balls to sell at quite a significant margin despite the "volume discounts"...or why not they share the patent freely, or charge just a small nominal cost for other producers to produce the vaccine? After all, the world genuinely needs the vaccines so desperately while there are plenty of vaccine facilities in the world that can add to the supply and distribution of the vaccines. Why keep it to themselves when every extra dose could have the potential to save 1 life? Do they feel ashamed? I would say absolutely, NO
Extra reading :
https://www.nytimes.com/2020/12/17/opinion/covid-vaccine-big-pharma.html

To answer your question, as long as the company can command it, they will charge it despite the anguish/chagrin of many. Their previous normalised margin for glove makes are not a benchmark of what they should be charging now.

Posted by Targeted > 2020-12-20 05:32 | Report Abuse

@information Apart from demand, three other factors do not favour the glove manufacturers at the moment. Firstly, it is labour intensive and after the recent brouhaha, wages and living conditions have to improve if the companies want to continue exporting their products to developed countries. Both wages and living conditions are sticky and will not come down even if prices ....

>>>>>>>>>>>>>>>>>

As a result of the. unfavourable factprs u mentioned, there should be.many owners of glove companaies try to sell off cheaply.......instead we see quite the opposite..........isnt it likely. they know somethingbyou dont? Think la........

Posted by Targeted > 2020-12-20 05:36 | Report Abuse

What could it be?,.........could it be that they hv comprehensively calculated not only demand but also the supply side.........the results is the apparent confidence of the glovee owners......

Posted by EngineeringProfit > 2020-12-20 07:49 | Report Abuse

Time for the house to recollect cheap

Posted by Sslee > 2020-12-20 07:58 | Report Abuse

If you have technology advantage or patent then no other competitor can challenge your monopoly position you can increase your sale price as you wish.

As for software you only incurred cost during development and then you can sell to the word cheaply but NP margin will still remain sky high.

For glove making every tom and jerry also can start one.
And do you think for the past 20 years when NP margin is about 10% and because of Covid 19 the new normal NP margin is 35-60% and this new normal will stay for next 20 years?

Posted by sosfinance > 2020-12-20 08:04 | Report Abuse

Using Top Glove as example, I believe they can make about RM25 billion in next 10 years. Hence, using a PE25X, the estimated intrinsic value is about RM7.80.

Posted by Sslee > 2020-12-20 08:16 | Report Abuse

Yes provided Topglov know how to use their new found windfall profit for new investment and diversification and not wasted in SBB to satisfy one man ego to be number 1 market cap in Bursa.

Posted by emsvsi > 2020-12-20 10:31 | Report Abuse

All sophisticated glove investors should look to diversify their portfolio risk and include direct recovery stocks

Top pick is Genting Berhad powered by

Catalysts:

Vaccine FDA EUA (Pfizer-BioNTech; Moderna) and Full Approval
Vaccine Roll Outs (UK & US & Singapore)
Year End & CNY Gaming Sector Rally and Super Cycle
Vaccine Malaysia approval / supply agreement / delivery / administering
Resorts World Las Vegas & Resorts World Genting Theme Park
US & Bahamas and UK & Egypt revival
Celurarity Inc Covid-19 treatment trials
WHO / COVAX approves and distributes vaccines
WHO declares pandemic over
Border opening / international visitors
Genting Plantations (CPO record high)
Genting Power, Property, Oil & Gas (cyclical sector in an massive upcycle)

Sincerely,
EMSVSI

Posted by onionchong > 2020-12-20 12:01 | Report Abuse

I know this article is nonsense the moment you incite humanity and national pride in your analysis. There is no way any glove company can sustain that kind of profitability in the long run. Vaccine is being developed and economy is heading towards recovery. Please also do not forget the huge increase in supply globally as new companies enter the industry. This is cold hard fact. Please spare us from your senseless claim about benefits towards humanity and national pride.

Posted by oohlala > 2020-12-20 14:15 | Report Abuse

Please don't pull in humanity etc bullshit into analysis. if that is the case, all big phamaceutical company should not earn what they are earning now, hospital and doctors should not charge the price they are charging now. in fact, glove price did not increase 10x. please refer to supermx press release, ex-factory price increased 3x while price to end user is about double from USD 90 to now USD 180-200. What makes a different is middle man being eliminated or their margin reduced.

Posted by Goldberg > 2020-12-20 21:07 | Report Abuse

@oohlala- Fully agree never, pull in humanity etc bullshit into analysis.
===============================================

Please don't pull in humanity etc bullshit into analysis. if that is the case, all big phamaceutical company should not earn what they are earning now, hospital and doctors should not charge the price they are charging now. in fact, glove price did not increase 10x. please refer to supermx press release, ex-factory price increased 3x while price to end user is about double from USD 90 to now USD 180-200. What makes a different is middle man being eliminated or their margin reduced.

Posted by Sslee > 2020-12-20 22:15 | Report Abuse

My simple question remain:

What should be a reanonable and fair NP margin for glove sector?

Note: Before covid 19 the NP margin is abt 7-15% and last quarter it is 34-60%.

And how more higher can glove players allowed to incresae the selling price to NP magin of ??%

Posted by Morpheus61 > 2020-12-20 22:23 | Report Abuse

With increasing capacity even with a 25% Net margin, we should see incremental Revenue and Profits

Posted by Andre Kua > 2020-12-21 12:56 | Report Abuse

With such crazy price increase, glove has become a commodity. I think the price will come crashing down one day when covid is over and those profiteers will be gone.

Posted by Targeted > 2020-12-21 13:34 | Report Abuse

Most important numbers for glove investors, superbly laid out. Quality work, should be equal to standard required by glove industry experts...

https://klse.i3investor.com/m/blog/Newroc/2020-12-21-story-h1538313735-GLOVE_SUPPLY_WILL_NOT_EXCEED_DEMAND.jsp

Posted by Maxpowar > 2020-12-21 15:29 | Report Abuse

@andrekua Wah copy paste what you wrote in lowyat forum to i3investor..Geng..want sabo glove counters also don’t so obvious la deyh..

Posted by calvintaneng > 2020-12-22 00:08 | Report Abuse

SSLee

To get the answers just call

Topglove
Supermax
Kossan
Harta

Accounts dept

They should have all the figures

As outsiders we can only make guesses

That is what I did with esceramic , Hlt Mr Ken I called him 3 times, Kssc, Careplus , luxchem and xin xin engineers

By calling them directly you might get more accurate figures

Posted by calvintaneng > 2020-12-22 00:14 | Report Abuse

We also called Jtiasa, Wtk, Thplant and many others about their palm oil and lumber business

That is how we get to know all necessary facts and figures

They have people willing to update you the latest on palm oil and lumber progress

After glove theme is Palm oil theme