KUALA LUMPUR: Investors flocked to rubber glove counters yesterday as the FBM KLCI continued to slide on weakening global economic sentiments.
The bellwether FBM KLCI index lost 9.07 points to close at 1,441.18 points, but rubber glove manufacturers bucked the trend and were among the top gainers on the local market yesterday.
Supermax Corp Bhd strengthened 9% or 27 sen to RM3.22 while Latexx Partners Bhd and Adventa Bhd gained 14 sen each to RM1.63 and RM1.67 respectively.
Top Glove Corp Bhd and Hartalega Holdings Bhd added one sen each to RM4.13 and RM5.51 respectively while Kossan Rubber Industries Bhd moved up eight sen to RM2.80.
Investors flocked to these counters as headwinds came to an end with latex prices falling from the all-time high of RM10.93 per kg in April to close at RM7.99 per kg yesterday.
Analysts also noted that the strengthening greenback against most currencies and softening supply have brought glove makers back in favour. The ringgit weakened to 3.129 yesterday against the US dollar from 2.939 seen on July 27.
Given the improving factors, glove makers are expecting better profitability moving forward.
Top Glove announced on Tuesday that it is expecting 20% revenue growth for FY12 ending Aug 31 on the back of growing demand and new capacity. For FY11, Top Glove’s net profit fell 54% to RM115.2 million, dragged down by high latex prices and the strong dollar.
Top Glove is currently adding new production lines that would increase its total capacity to 42 billion gloves per annum. Its chairman Tan Sri Lim Wee Chai had forecast latex prices falling to RM7 per kg in the next three to six months, depending on weather conditions.
Lim’s view is echoed by Supermax executive chairman and group managing director Datuk Seri Stanley Thai who said latex prices are expected to retreat further to between RM6 and RM6.50 per kg in 1QFY12.
Thai said global demand and consumption would continue to grow next year at between 8% and 12% per annum, considering gloves are recession-proof as they are used in the healthcare sector.
An analyst noted that investors view rubber glove stocks as defensive counters during bearish market conditions.
“Whether in times of recession or not, the healthcare sector will always have demand for gloves. As such, investors flock to these counters especially given the lack of opportunities in the market,” said OSK Research analyst Jason Yap.
Based on Bloomberg data, Hartalega had 10 “buy” calls and one “neutral” call with a median target price of RM6.98. There were no “sell” recommendations on the stock.
Top Glove had nine “sell”, eight “neutral” and four “buy” calls, with a median target price of RM4.02. Kossan had a median price of RM3.26 with seven “buy” and eight “neutral” recommendations.
Supermax had four “buys”, two “sells” and six “neutrals” with a median target price of RM3.49. Adventa attracted one “buy” and “sell” each and two “neutral” calls, with a median price of RM1.64.
This article appeared in The Edge Financial Daily, October 21, 2011.
The bellwether FBM KLCI index lost 9.07 points to close at 1,441.18 points, but rubber glove manufacturers bucked the trend and were among the top gainers on the local market yesterday.
Supermax Corp Bhd strengthened 9% or 27 sen to RM3.22 while Latexx Partners Bhd and Adventa Bhd gained 14 sen each to RM1.63 and RM1.67 respectively.
Top Glove Corp Bhd and Hartalega Holdings Bhd added one sen each to RM4.13 and RM5.51 respectively while Kossan Rubber Industries Bhd moved up eight sen to RM2.80.
Investors flocked to these counters as headwinds came to an end with latex prices falling from the all-time high of RM10.93 per kg in April to close at RM7.99 per kg yesterday.
Analysts also noted that the strengthening greenback against most currencies and softening supply have brought glove makers back in favour. The ringgit weakened to 3.129 yesterday against the US dollar from 2.939 seen on July 27.
Given the improving factors, glove makers are expecting better profitability moving forward.
Top Glove announced on Tuesday that it is expecting 20% revenue growth for FY12 ending Aug 31 on the back of growing demand and new capacity. For FY11, Top Glove’s net profit fell 54% to RM115.2 million, dragged down by high latex prices and the strong dollar.
Top Glove is currently adding new production lines that would increase its total capacity to 42 billion gloves per annum. Its chairman Tan Sri Lim Wee Chai had forecast latex prices falling to RM7 per kg in the next three to six months, depending on weather conditions.
Lim’s view is echoed by Supermax executive chairman and group managing director Datuk Seri Stanley Thai who said latex prices are expected to retreat further to between RM6 and RM6.50 per kg in 1QFY12.
Thai said global demand and consumption would continue to grow next year at between 8% and 12% per annum, considering gloves are recession-proof as they are used in the healthcare sector.
An analyst noted that investors view rubber glove stocks as defensive counters during bearish market conditions.
“Whether in times of recession or not, the healthcare sector will always have demand for gloves. As such, investors flock to these counters especially given the lack of opportunities in the market,” said OSK Research analyst Jason Yap.
Based on Bloomberg data, Hartalega had 10 “buy” calls and one “neutral” call with a median target price of RM6.98. There were no “sell” recommendations on the stock.
Top Glove had nine “sell”, eight “neutral” and four “buy” calls, with a median target price of RM4.02. Kossan had a median price of RM3.26 with seven “buy” and eight “neutral” recommendations.
Supermax had four “buys”, two “sells” and six “neutrals” with a median target price of RM3.49. Adventa attracted one “buy” and “sell” each and two “neutral” calls, with a median price of RM1.64.
This article appeared in The Edge Financial Daily, October 21, 2011.
