SINGAPORE — The latest plunge in share costs of Malaysian rubber gloves makers is "unjustified," mentioned an analyst who's predicting additional u
SINGAPORE — The latest plunge in share costs of Malaysian rubber gloves makers is “unjustified,” mentioned an analyst who’s predicting additional upside for the shares.
Shares of Prime Glove, the world’s largest rubber gloves producer, have fallen 17.7% this yr as of Monday’s shut. Its smaller friends Hartalega, Supermax and Kossan have dropped between 18% and 30%.
As compared, the benchmark FTSE Bursa Malaysia KLCI Index fell 0.9% in the identical interval.
Workers of Prime Glove, the world’s greatest glove maker, examine on the manufacturing of latex gloves in a watertight take a look at room at one of many firm’s factories in Selangor, Malaysia, on Feb. 18, 2020.
Samsul Stated | Bloomberg | Getty Photos
“We’re sustaining our Chubby name on the sector, as we imagine the latest decline in share costs is unjustified,” Ng Chi Hoong, an analyst at Malaysian funding financial institution Affin Hwang, wrote in a Monday report.
The decline in Malaysian glove shares adopted a major leap final yr when the Covid-19 pandemic boosted demand for medical gloves.
Elements hurting investor confidence within the shares embrace a possible fall in promoting costs of gloves on decrease demand as extra persons are being vaccinated globally, mentioned Ng.
As well as, Prime Glove’s plans to checklist in Hong Kong — its third inventory itemizing after Malaysia and Singapore — additionally triggered worries that the corporate is elevating funds in anticipation of a weaker outlook, he mentioned.
However these considerations will probably ease, mentioned Ng. Listed here are his goal costs for Malaysia’s glove shares.
Affin Hwang’s goal costs for Malaysian glove shares
| Shares | Monday’s shut (Malaysian ringgit) | Goal value (Malaysian ringgit) | Upside |
|---|---|---|---|
| Prime Glove | 5.04 | 10.10 | 100% |
| Hartalega | 9.70 | 17.00 | 75% |
| Supermax | 4.21 | 10.90 | 159% |
| Kossan | 3.66 | 9.30 | 154% |
Demand to remain above pre-Covid ranges
The analyst mentioned the leap in common promoting costs of gloves will not be sustainable, and forecast a 30% to 35% fall in costs in 2022. Nonetheless, costs will probably stay above pre-pandemic ranges for the subsequent two to 3 years not less than, he mentioned.
That is partly as a result of demand for gloves is predicted to stay elevated within the coming years because the medical sector makes use of extra private protecting tools, mentioned Ng.
He added that he agreed with the report by consultancy Frost and Sullivan and commissioned by Prime Glove, which projected demand for disposable gloves to extend by a median 15% yearly for the subsequent 5 years.
Such progress in demand would come alongside a 20% annual enhance in provide within the subsequent few years, mentioned Ng.
Prime Glove plans to checklist in Hong Kong
One other improvement that has pushed latest value actions in Malaysian glove shares is Prime Glove’s deliberate third itemizing in Hong Kong.
The corporate mentioned final month that it utilized for a “twin main itemizing” in Hong Kong that might increase as much as 7.7 billion ringgit ($1.87 billion). It mentioned it’ll maintain its present main itemizing in Malaysia and secondary itemizing in Singapore.
Traders reacted negatively to the information on considerations that the extra itemizing would dilute Prime Glove’s earnings per share.
Nonetheless, Ng has maintained his “purchase” ranking for Prime Glove and its Malaysian friends. He mentioned the decline in share costs have introduced valuations right down to ranges which are “too low-cost to disregard.”
The analyst added that in contrast with their worldwide counterparts Malaysian glove makers are delivering increased dividend yield and higher return on fairness — a measure of monetary efficiency.
Prime Glove on Tuesday reported a surge in quarterly earnings to 2.87 billion ringgit ($695 million) for the three months ended February, from 115.68 million ringgit ($28.03 million) a yr in the past.
The corporate mentioned world demand for gloves continued to be “sturdy,” with the Covid pandemic spurring a rise in glove utilization and heightened hygiene consciousness.