Analyst on outlook for Top Glove, Malaysian glove stocks

SINGAPORE — The modern plunge in share rates of Malaysian rubber gloves makers is “unjustified,” stated an analyst who’s predicting further more upside for the shares.

Shares of Prime Glove, the world’s largest rubber gloves producer, have fallen 17.7% this calendar year as of Monday’s shut. Its smaller sized peers Hartalega, Supermax and Kossan have dropped between 18% and 30%.

In comparison, the benchmark FTSE Bursa Malaysia KLCI Index fell .9% in the identical time period.

Team of Top Glove, the world’s most important glove maker, test on the creation of latex gloves in a watertight check room at a person of the firm’s factories in Selangor, Malaysia, on Feb. 18, 2020.

Samsul Stated | Bloomberg | Getty Photographs

“We are protecting our Obese contact on the sector, as we think the latest drop in share price ranges is unjustified,” Ng Chi Hoong, an analyst at Malaysian investment bank Affin Hwang, wrote in a Monday report.

The decrease in Malaysian glove shares followed a major soar previous 12 months when the Covid-19 pandemic boosted demand for health care gloves.

Factors hurting trader self confidence in the stocks include things like a probable slide in offering price ranges of gloves on decrease need as additional folks are currently being vaccinated globally, mentioned Ng.

In addition, Leading Glove’s plans to listing in Hong Kong — its 3rd stock listing immediately after Malaysia and Singapore — also brought on concerns that the corporation is raising cash in anticipation of a weaker outlook, he explained.

But individuals concerns will very likely relieve, mentioned Ng. Here are his target selling prices for Malaysia’s glove stocks.

Affin Hwang’s concentrate on price ranges for Malaysian glove shares

Shares Monday’s near (Malaysian ringgit) Focus on rate (Malaysian ringgit) Upside
Leading Glove 5.04 10.10 100%
Hartalega 9.70 17.00 75%
Supermax 4.21 10.90 159%
Kossan 3.66 9.30 154%

Desire to remain previously mentioned pre-Covid amounts

The analyst stated the leap in average offering selling prices of gloves is not sustainable, and forecast a 30% to 35% slide in rates in 2022. Still, selling prices will possible continue being over pre-pandemic levels for the subsequent two to three years at least, he explained.

Which is partly mainly because demand from customers for gloves is expected to stay elevated in the coming several years as the clinical sector uses much more personalized protective equipment, said Ng.

He added that he agreed with the report by consultancy Frost and Sullivan and commissioned by Major Glove, which projected need for disposable gloves to increase by an average 15% every year for the following five many years.

Such expansion in demand would appear along with a 20% annual enhance in source in the subsequent several years, claimed Ng.

Top rated Glove designs to listing in Hong Kong

An additional advancement that has pushed latest value steps in Malaysian glove stocks is Top Glove’s planned 3rd listing in Hong Kong.

The company explained last thirty day period that it applied for a “twin most important listing” in Hong Kong that could increase up to 7.7 billion ringgit ($1.87 billion). It mentioned it will keep its existing main listing in Malaysia and secondary listing in Singapore.

Buyers reacted negatively to the news on worries that the supplemental listing would dilute Prime Glove’s earnings per share.

However, Ng has maintained his “acquire” rating for Top Glove and its Malaysian friends. He reported the drop in share costs have brought valuations down to degrees that are “also inexpensive to ignore.”

The analyst included that in comparison with their worldwide counterparts Malaysian glove makers are offering increased dividend yield and improved return on equity — a evaluate of financial overall performance.

Top rated Glove on Tuesday claimed a surge in quarterly income to 2.87 billion ringgit ($695 million) for the three months finished February, from 115.68 million ringgit ($28.03 million) a yr ago.

The corporation stated world wide desire for gloves ongoing to be “robust,” with the Covid pandemic spurring an improve in glove usage and heightened hygiene consciousness.