Written by Chong Jin Hun
Monday, 21 November 2011 12:37
KUALA LUMPUR: Latex prices, which hit fresh lows in recent days, are seen to be on a downward trend in the coming months in anticipation of lower demand by major industrial users, a positive for natural rubber (NR) glove producers although other concerns linger.
Analysts said rubber prices could be stifled by lower demand due to the eurozone sovereign debt crisis, besides automotive sector supply chain disruption from the floods in Thailand. Normalising demand for rubber gloves in the absence of disease outbreaks is another factor underlying lower consumption of rubber in the coming months.
“There is a downside bias to our forecast for rubber prices,” an analyst with MIDF Amanah Investment Bank Bhd told The Edge Financial Daily.
MIDF’s forecast indicates that latex will trade at an average of RM9 a kg this year before falling to RM8.75 in 2012. An analyst said the current situation would benefit glovemakers with a higher composition of NR gloves than synthetic rubber or nitrile glovemakers. Notable players include Top Glove Corp Bhd whose portfolio comprises 81% natural rubber gloves with the balance 19% being nitrile products.
Supermax Corp Bhd has a ratio of 80:20 for natural and nitrile gloves respectively while Kossan Rubber Industries Bhd has a ratio of 55:45.
Concerns over normalising demand for gloves due to the absence of outbreaks have given rise to fears of a price war among players, which could hurt the profit margins of these companies, the analyst added.
“Buyers of rubber gloves are adopting a wait and see attitude in anticipation of rubber prices going down further,” she said. Latex makes up some 60% of glovemakers’ cost.
The analyst said that while floods in Thailand have caused supply chain disruptions for the automotive sector, the situation there has begun to recover, and this is expected to lend support to rubber prices.
OSK Research Sdn Bhd analyst Jason Yap said he expects rubber prices to decline in the long term as demand is seen to be anaemic. This is due to moves by glovemakers to increase output of nitrile products and normalising demand for gloves.
Yap also said the global automotive sector, which consumes 70% of world rubber output, encountered setbacks against a weak global economic backdrop and floods in Thailand.
Thailand, Indonesia and Malaysia are the world’s top producers and exporters of rubber, accounting for 70% of global output. It has been widely anticipated that these top suppliers would embark on measures to stem the decline in natural rubber prices.
Policymakers in Thailand, for example, plan to spend 10 billion baht (RM1 billion) to increase inventory of the commodity. It was reported that a soft loan of some 10 billion baht would be given to the country’s estimated 600 cooperatives to purchase rubber from farmers at 95 baht per kg. The move is expected to drain supply out of the market to support prices of the commodity. Lawmakers there have also encouraged tappers to delay tapping between now and January next year to cut supply.
OSK’s Yap said amid expectations that top rubber producers will stem the decline in rubber prices, glove buyers are anticipated to increase their inventory ahead of the next year’s wintering season, when latex production is lower.
Rubber prices declined to fresh lows in recent days on expectation that the eurozone sovereign debt woes and lower vehicle output by major automotive players in Thailand due to the floods will reduce demand for the commodity.
Over the last six months, Malaysian latex prices have fallen 32% from a high of RM9.51 a kg on May 27 to RM6.43 on Nov 14.
The eurozone debt woes are far from over. Economists expect economic activities there to further weaken after a survey involving purchasing executives indicated that the manufacturing and service industries declined further last month leading to expectations of a contraction in the eurozone’s GDP in 4Q11 and 1Q12.
As the automotive sector consumes 70% of world rubber supply, a perceived weakness in the automotive industry will naturally impact rubber prices.
The floods in Thailand are creating a second major supply disruption in the global automotive sector since the March 11 earthquake and tsunami in Japan. According to news reports, the floods in Thailand have spread across 64 of Thailand’s 77 provinces and affected seven industrial enclaves where Honda Motor Co and auto parts makers have set up factories.
Global automotive players are also feeling the pinch. According to news reports, car factories across the Americas, and Asia, including Malaysia and Indonesia, will see lower vehicle output due to the supply chain disruption.
RHB Research Institute wrote in a note last Friday that it had revised downwards its 2011 total industry volume (TIV) for the Malaysian automotive sector to 604,000 units compared with 616,000 units previously.
This follows guidance from the Malaysian Automotive Association (MAA) that vehicle sales here would decline this month due to supply disruptions resulting from the floods in Thailand.
Year-to-date till October, Malaysian TIV fell 0.3% to 503,898 units, according to MAA.
This article appeared in The Edge Financial Daily, November 21, 2011.
Showing posts with label Glove Maker. Show all posts
Showing posts with label Glove Maker. Show all posts
Tuesday, November 22, 2011
Friday, July 15, 2011
Rubber gloves not going anywhere yet
Written by Financial Daily
Thursday, 14 July 2011 11:01
Rubber gloves
Maintain neutral: The cost of latex has come down while nitrile has risen. But we retain our preference for nitrile glovemakers premised on our view that latex cost remains on a long-term rising trajectory due to the inflexible production, in light of rising demand from the growing auto industry. We downgrade Top Glove Corp Bhd to “sell” (from “hold”), with a lower discounted cash flow-derived target price (TP) of RM4.40 (from RM5.10). We maintain our “buy” calls on Hartalega Sdn Bhd (TP RM6.80) and Kossan Rubber Industries Bhd (RM3.60).
The average selling price (ASP) disparity between latex and nitrile gloves has narrowed substantially. Current glove quotations still favour nitrile gloves with the ASP about 10% lower than powder free latex gloves and on par with to slightly higher than powdered latex gloves.
The ASP gap was 20% to 30% in 1Q11, favouring nitrile over latex powder free gloves. We believe the ASP gap will widen again in 4Q11 on seasonally higher latex cost and lower nitrile cost (in tandem with the falling crude oil price).
We see downside risk on consensus estimates for Top Glove’s FY12/FY13 earnings, which imply a 46% year-on-year growth in FY12 and 15% growth in FY13. Brokers’ earnings expectations in FY12/FY13 are banked on a sharp pick-up in sales volume (15% to 20%), at levels above the Influenza A H1N1 period and also above the 8% to 10% global glove demand growth. We cut our earnings estimates for Top Glove by 14% after lowering our sales volume assumption by between 4% and 5%.
Hartalega could see its near-term margins crimped by the higher nitrile cost year to-date and upcoming 1QFY12 results may see a quarter-on-quarter dip. Nevertheless, this is within our expectation as we impute for lower margins in FY12 to FY14 (-3.5 to 4.5 basis points). We continue to like Hartalega for its superior margins and return on equity, which enable the company to defend its market share, especially in a higher cost and overcapacity environment.
We are lukewarm on the sector as there are no fresh catalysts. The falling latex cost theme is fully played out with Top Glove’s recent share price performance (+5% in one week) and forward price-earnings ratio valuation of 20 times.
Hartalega remains our top pick but we think share price momentum will be slow as the market takes note of the rising nitrile cost. The lull provides a good opportunity to accumulate the stock. — Maybank IB Research, July 13
This article appeared in The Edge Financial Daily, July 14, 2011.
Thursday, 14 July 2011 11:01
Rubber gloves
Maintain neutral: The cost of latex has come down while nitrile has risen. But we retain our preference for nitrile glovemakers premised on our view that latex cost remains on a long-term rising trajectory due to the inflexible production, in light of rising demand from the growing auto industry. We downgrade Top Glove Corp Bhd to “sell” (from “hold”), with a lower discounted cash flow-derived target price (TP) of RM4.40 (from RM5.10). We maintain our “buy” calls on Hartalega Sdn Bhd (TP RM6.80) and Kossan Rubber Industries Bhd (RM3.60).
The average selling price (ASP) disparity between latex and nitrile gloves has narrowed substantially. Current glove quotations still favour nitrile gloves with the ASP about 10% lower than powder free latex gloves and on par with to slightly higher than powdered latex gloves.
The ASP gap was 20% to 30% in 1Q11, favouring nitrile over latex powder free gloves. We believe the ASP gap will widen again in 4Q11 on seasonally higher latex cost and lower nitrile cost (in tandem with the falling crude oil price).
We see downside risk on consensus estimates for Top Glove’s FY12/FY13 earnings, which imply a 46% year-on-year growth in FY12 and 15% growth in FY13. Brokers’ earnings expectations in FY12/FY13 are banked on a sharp pick-up in sales volume (15% to 20%), at levels above the Influenza A H1N1 period and also above the 8% to 10% global glove demand growth. We cut our earnings estimates for Top Glove by 14% after lowering our sales volume assumption by between 4% and 5%.
Hartalega could see its near-term margins crimped by the higher nitrile cost year to-date and upcoming 1QFY12 results may see a quarter-on-quarter dip. Nevertheless, this is within our expectation as we impute for lower margins in FY12 to FY14 (-3.5 to 4.5 basis points). We continue to like Hartalega for its superior margins and return on equity, which enable the company to defend its market share, especially in a higher cost and overcapacity environment.
We are lukewarm on the sector as there are no fresh catalysts. The falling latex cost theme is fully played out with Top Glove’s recent share price performance (+5% in one week) and forward price-earnings ratio valuation of 20 times.
Hartalega remains our top pick but we think share price momentum will be slow as the market takes note of the rising nitrile cost. The lull provides a good opportunity to accumulate the stock. — Maybank IB Research, July 13
This article appeared in The Edge Financial Daily, July 14, 2011.
Wednesday, June 1, 2011
Analysts still bullish on rubber glove stocks
By Ooi Tee Ching Published: 2011/06/01
KUALA LUMPUR: Analysts are still bullish on rubber glove stocks and consider them low risk despite the increase in electricity and natural gas tariffs.
Effective today, the government raised electricity rates by 7 per cent. There is also a 20 per cent price hike for natural gas across industries.
Heavy gas users like some steel millers, petrochemical, and oleochemical fertiliser producers, who consume more than two mmscfd (million standard cubic feet per day), will pay RM18.35 per mmBtu (million metric British thermal unit) instead of RM15.35/mmBtu previously.
The last time the government raised gas prices was in August 2008 by a hefty 72 per cent to RM22 per mmBtu from RM12.80 per mmBtu.
After much complaints, the government, in March 2009, lowered the gas tariffs by 30 per cent to RM15.35 per mmBtu.
From today, however, rubber glove manufacturers using less than 2mmscfd will need to pay the new rate of RM16.07 per mmBtu. This is 7 per cent more than the old RM15.00 per mmBtu rate.
Fiona Leong of Citi Investment Reseach is keeping her earnings forecasts for glovemakers unchanged because the 20 per cent gas price hike would only raise operating costs by 0.7 per cent, if there is no cost pass through.
In her note to investors, she said the hike would have a small knock on earnings of glovemakers for June and July because selling prices for deliveries had already been firmed up.
But glovemakers are hopeful of passing on the higher fuel costs as the gradual easing in natural latex price gives room for price adjustments. Bulk latex price has retreated by 11 per cent from an average of RM10.45 per kg in April to RM9.43 per kg in May.
Leong noted that rubber glovemakers face sharp volatility in latex price and the stronger ringgit. This would hamper accurate adjustments of selling prices.
Jason Yap of OSK Investment Research said given that the quantum and timeline of the hike of every six months until 2015, rubber glove manufacturers would be able to make adjustments to their gloves prices in advance and pass on the energy cost increase to their customers.
His top picks include Top Glove Corp Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd.
He has valued Top Glove at RM6.50 and expects Supermax to rise up to RM6.91. His target price for Kossan is RM5.
Yap said the companies are the main beneficiaries from easing of latex price as they have higher natural rubber glove mix.
KUALA LUMPUR: Analysts are still bullish on rubber glove stocks and consider them low risk despite the increase in electricity and natural gas tariffs.
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Heavy gas users like some steel millers, petrochemical, and oleochemical fertiliser producers, who consume more than two mmscfd (million standard cubic feet per day), will pay RM18.35 per mmBtu (million metric British thermal unit) instead of RM15.35/mmBtu previously.
The last time the government raised gas prices was in August 2008 by a hefty 72 per cent to RM22 per mmBtu from RM12.80 per mmBtu.
After much complaints, the government, in March 2009, lowered the gas tariffs by 30 per cent to RM15.35 per mmBtu.
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Fiona Leong of Citi Investment Reseach is keeping her earnings forecasts for glovemakers unchanged because the 20 per cent gas price hike would only raise operating costs by 0.7 per cent, if there is no cost pass through.
In her note to investors, she said the hike would have a small knock on earnings of glovemakers for June and July because selling prices for deliveries had already been firmed up.
But glovemakers are hopeful of passing on the higher fuel costs as the gradual easing in natural latex price gives room for price adjustments. Bulk latex price has retreated by 11 per cent from an average of RM10.45 per kg in April to RM9.43 per kg in May.
Leong noted that rubber glovemakers face sharp volatility in latex price and the stronger ringgit. This would hamper accurate adjustments of selling prices.
Jason Yap of OSK Investment Research said given that the quantum and timeline of the hike of every six months until 2015, rubber glove manufacturers would be able to make adjustments to their gloves prices in advance and pass on the energy cost increase to their customers.
His top picks include Top Glove Corp Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd.
He has valued Top Glove at RM6.50 and expects Supermax to rise up to RM6.91. His target price for Kossan is RM5.
Yap said the companies are the main beneficiaries from easing of latex price as they have higher natural rubber glove mix.
Wednesday, April 6, 2011
Rubber glove prices to bounce back
Rubber gloves
Maintain overweight: Taking our cue from higher latex prices, we raise our CY11/13 price assumptions by 5% to 7% for nitrile and 9% to 10% for rubber latex. This reduces our FY11/12 sector net profit by 8% to 9%. Despite the earnings cut and the disappointing results season, we continue to rate the sector an “overweight” as the headwinds have left the sector’s CY12 price-earnings ratio (PER) at 8.5 times or about 30% below the KLCI’s 12.7 times PER.
This is despite a three-year earnings per share (EPS) compound annual growth rate of 11%, which is supported by 8% to 15% annual demand growth. Kossan Rubber Industries Bhd replaces Hartalega Sdn Bhd as our top pick, given Hartalega’s margin compression and better upside for Kossan.
Potential re-rating catalysts for the sector include higher outsourcing and lower input costs.
Annualised net profit for the companies under coverage missed expectations, coming in at just 78% of our estimates and 82% of consensus. Results were weighed down by a 64% year-on-year (y-o-y) slump in Top Glove Corp Bhd’s 2QFY11 net profit due to higher input cost and weak demand.
Sector revenue for the quarter fell 2% quarter-on-quarter (q-o-q) because of higher sales of nitrile gloves which have lower selling prices. On a y-o-y basis, revenue rose 16% due to capacity expansion. But rising costs pulled the sector net profit down 24% q-o-q and 220% y-o-y.
After peaking at RM10.89 per kg on Feb 22, rubber latex price fell 21% in two weeks to RM8.56 per kg on the back of growth concerns. The fall was accentuated by disruptions to global supply chains after Japan’s earthquake. But the rubber price fall was short-lived as prices bounced back with a vengeance, rising 24% in just over a week to RM10.65 per kg as at April 4.
Nitrile latex producers raised prices around the same time (by about 10% in March) as midstream refiners battled with a Brent price of above US$100 per barrel. Even so, the volatility of rubber has renewed interest in glove stocks, which have been out of favour lately.
Glovemakers can mitigate the cost volatility by diversifying their product mix. While customers in regulated markets such as the US and EU are unlikely to change buying behaviour, emerging market end-users are more fickle. Glovemakers with a balanced product mix such as Kossan (40:60 nitrile:rubber mix) are best positioned to meet demand from growth markets in emerging Asia and Latin America.
We like Kossan and Hartalega. Kossan is the most balanced glovemaker, has consistently met expectations and offers more upside than Hartalega. Despite offering 21% EPS growth for FY12, the stock trades at only 6.5 times forward PER. While it is true that Hartalega will continue to benefit from the switch to synthetics, we expect its margin to contract in FY12 as refiners start raising prices. — CIMB Research, April 5
This article appeared in The Edge Financial Daily, April 6, 2011.
Maintain overweight: Taking our cue from higher latex prices, we raise our CY11/13 price assumptions by 5% to 7% for nitrile and 9% to 10% for rubber latex. This reduces our FY11/12 sector net profit by 8% to 9%. Despite the earnings cut and the disappointing results season, we continue to rate the sector an “overweight” as the headwinds have left the sector’s CY12 price-earnings ratio (PER) at 8.5 times or about 30% below the KLCI’s 12.7 times PER.
This is despite a three-year earnings per share (EPS) compound annual growth rate of 11%, which is supported by 8% to 15% annual demand growth. Kossan Rubber Industries Bhd replaces Hartalega Sdn Bhd as our top pick, given Hartalega’s margin compression and better upside for Kossan.
Potential re-rating catalysts for the sector include higher outsourcing and lower input costs.
Annualised net profit for the companies under coverage missed expectations, coming in at just 78% of our estimates and 82% of consensus. Results were weighed down by a 64% year-on-year (y-o-y) slump in Top Glove Corp Bhd’s 2QFY11 net profit due to higher input cost and weak demand.
Sector revenue for the quarter fell 2% quarter-on-quarter (q-o-q) because of higher sales of nitrile gloves which have lower selling prices. On a y-o-y basis, revenue rose 16% due to capacity expansion. But rising costs pulled the sector net profit down 24% q-o-q and 220% y-o-y.
After peaking at RM10.89 per kg on Feb 22, rubber latex price fell 21% in two weeks to RM8.56 per kg on the back of growth concerns. The fall was accentuated by disruptions to global supply chains after Japan’s earthquake. But the rubber price fall was short-lived as prices bounced back with a vengeance, rising 24% in just over a week to RM10.65 per kg as at April 4.
Nitrile latex producers raised prices around the same time (by about 10% in March) as midstream refiners battled with a Brent price of above US$100 per barrel. Even so, the volatility of rubber has renewed interest in glove stocks, which have been out of favour lately.
Glovemakers can mitigate the cost volatility by diversifying their product mix. While customers in regulated markets such as the US and EU are unlikely to change buying behaviour, emerging market end-users are more fickle. Glovemakers with a balanced product mix such as Kossan (40:60 nitrile:rubber mix) are best positioned to meet demand from growth markets in emerging Asia and Latin America.
We like Kossan and Hartalega. Kossan is the most balanced glovemaker, has consistently met expectations and offers more upside than Hartalega. Despite offering 21% EPS growth for FY12, the stock trades at only 6.5 times forward PER. While it is true that Hartalega will continue to benefit from the switch to synthetics, we expect its margin to contract in FY12 as refiners start raising prices. — CIMB Research, April 5
This article appeared in The Edge Financial Daily, April 6, 2011.
Thursday, March 31, 2011
Top Glove stretching valuations
Top Glove Corp Bhd
(March 30, RM5.30)
Maintain hold at RM5.28 with revised target price RM5.10 (from RM4.55): Latex cost has rebounded to the pre-Japan earthquake level of RM10.35 per kg. We reduce our FY11 earnings per share (EPS) forecast by 8% after we trim our sales volume assumption by 3%. Though Top Glove is trading at 15 times CY12 price-earnings ratio [PER] (above its five-year historical average of 13 times), we think short-term interest in the stock will sustain owing to expectations of falling latex costs in May.
We reiterate our “hold” call and adjust our target price upwards to RM5.10 (from RM4.55) as we roll forward our discounted cash flow valuation.
The tumble in latex cost (-14% on the fourth day after the March 11 quake) proved to be a knee-jerk reaction to the catastrophe in Japan. Latex cost has rebounded strongly by 21% to RM10.35 per kg (from the earthquake low), slightly above the pre-earthquake level.
In our view, the rebound was due to: (i) Japan accounting for only 7% of global latex demand; (ii) latex supply is still in a deficit position on current low production season; and (iii) major producers’ definitive actions in shoring up prices — the Thai government has set a floor rate for rubber sheet (rubber in its original form, before processing to latex) at 120 baht (RM12) per kg.
At the current latex cost level, Top Glove’s glove pricing quotation remains unfavourable to latex gloves (circa 80% of sales volume), relative to nitrile. Low-quality powdered latex glove is quoted at US$35 (RM106) per 1,000 pieces (on par to nitrile glove) and PF latex is at a 13% premium to nitrile.
We understand that the company did not see any sales recovery when latex cost tumbled as distributors were hoping for much lower latex prices.
Though we expect orders to pick up strongly after May (post “wintering” season), our previous assumption for sales volume to rebound 30% half-on-half in 2HFY11 was too bullish. We reduce our FY11 sales volume forecast by 3% leading to an 8% downgrade to FY11 EPS.
We make no change to our FY12/13 numbers. We maintain our “hold” rating on Top Glove and adjust our target price (TP) upward to RM5.10 (from RM4.55) as we roll forward our discounted cash flow valuation. Our new TP implies 18.2 times CY11 PER valuations, close to its 18.7 times, one standard deviation above its historical mean. — Maybank IB Research, March 30
This article appeared in The Edge Financial Daily, March 31, 2011.
(March 30, RM5.30)
Maintain hold at RM5.28 with revised target price RM5.10 (from RM4.55): Latex cost has rebounded to the pre-Japan earthquake level of RM10.35 per kg. We reduce our FY11 earnings per share (EPS) forecast by 8% after we trim our sales volume assumption by 3%. Though Top Glove is trading at 15 times CY12 price-earnings ratio [PER] (above its five-year historical average of 13 times), we think short-term interest in the stock will sustain owing to expectations of falling latex costs in May.
We reiterate our “hold” call and adjust our target price upwards to RM5.10 (from RM4.55) as we roll forward our discounted cash flow valuation.
The tumble in latex cost (-14% on the fourth day after the March 11 quake) proved to be a knee-jerk reaction to the catastrophe in Japan. Latex cost has rebounded strongly by 21% to RM10.35 per kg (from the earthquake low), slightly above the pre-earthquake level.
In our view, the rebound was due to: (i) Japan accounting for only 7% of global latex demand; (ii) latex supply is still in a deficit position on current low production season; and (iii) major producers’ definitive actions in shoring up prices — the Thai government has set a floor rate for rubber sheet (rubber in its original form, before processing to latex) at 120 baht (RM12) per kg.
At the current latex cost level, Top Glove’s glove pricing quotation remains unfavourable to latex gloves (circa 80% of sales volume), relative to nitrile. Low-quality powdered latex glove is quoted at US$35 (RM106) per 1,000 pieces (on par to nitrile glove) and PF latex is at a 13% premium to nitrile.
We understand that the company did not see any sales recovery when latex cost tumbled as distributors were hoping for much lower latex prices.
Though we expect orders to pick up strongly after May (post “wintering” season), our previous assumption for sales volume to rebound 30% half-on-half in 2HFY11 was too bullish. We reduce our FY11 sales volume forecast by 3% leading to an 8% downgrade to FY11 EPS. We make no change to our FY12/13 numbers. We maintain our “hold” rating on Top Glove and adjust our target price (TP) upward to RM5.10 (from RM4.55) as we roll forward our discounted cash flow valuation. Our new TP implies 18.2 times CY11 PER valuations, close to its 18.7 times, one standard deviation above its historical mean. — Maybank IB Research, March 30
This article appeared in The Edge Financial Daily, March 31, 2011.
Monday, March 28, 2011
Rubber gloves: Much ado about latex
Written by Financial Daily
Monday, 28 March 2011 11:34
Rubber gloves sector
Maintain overweight: Although Top Glove and Supermax have different views on the direction of latex prices in the short term, both agree that the commodity’s price should be lower than now by year-end.
Top Glove believes that since the rubber plantations in some areas are still undergoing the wintering season, the latex price should resume its uptrend towards the year high of RM10.90/kg.
Supermax, on the other hand, thinks that the recent rebound was the consequence of latex suppliers, who could not accept the recent sharp fall in latex price, resorting to cutting latex supply. However, from April onwards, Supermax expects the price to drop by 50 sen each month and reach RM5.50/kg by December 2011.
It is our view that whether short-term or long-term, the latex price may not go up much further from its year high of RM10.90/kg, even if it breaks this resistance level. We think speculation from here on will subside after the 21% crash in latex price.
Also, we think that latex supply will continue to increase because: (i) the wintering season for most rubber trees will be over soon; (ii) the flooding in Thailand has eased as the weather improves; (iii) the Japanese automotive industry is expected to slow down after the crippling earthquake, which would crimp tyre demand and ultimately affect natural rubber demand; and (iv) more natural rubber latex will now be available since some rubber glove manufacturers have been switching to nitrile gloves.
We do not discount the possibility the oil price shooting past its record high of US$147 (RM444) per barrel given the continuing turmoil in the Middle East and the US intervention in recent days. We believe that the prices of all commodities will spike up, including that of latex.
Maintain “overweight”. Our top picks are Top Glove Corp Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd. Besides the fundamental reason for a potential fall in latex price, we think the share prices of these three companies have bottomed after correcting by 30% to 40% from their year highs and have experienced minimal sell-off since 4Q10, despite being hit by: (i) rising latex price to an all-time high of RM10.90/kg; (ii) unrest in the Middle East; and (iii) crash in the Japanese stock market. Hence, we think the downside risk is now limited and are advising investors to gradually accumulate on weakness.
We expect their share prices to recover once latex price begins on a downtrend and when the US dollar strengthens against the ringgit. — OSK Research, March 25
Monday, 28 March 2011 11:34
Rubber gloves sector
Maintain overweight: Although Top Glove and Supermax have different views on the direction of latex prices in the short term, both agree that the commodity’s price should be lower than now by year-end.
Top Glove believes that since the rubber plantations in some areas are still undergoing the wintering season, the latex price should resume its uptrend towards the year high of RM10.90/kg.
Supermax, on the other hand, thinks that the recent rebound was the consequence of latex suppliers, who could not accept the recent sharp fall in latex price, resorting to cutting latex supply. However, from April onwards, Supermax expects the price to drop by 50 sen each month and reach RM5.50/kg by December 2011.
It is our view that whether short-term or long-term, the latex price may not go up much further from its year high of RM10.90/kg, even if it breaks this resistance level. We think speculation from here on will subside after the 21% crash in latex price.
Also, we think that latex supply will continue to increase because: (i) the wintering season for most rubber trees will be over soon; (ii) the flooding in Thailand has eased as the weather improves; (iii) the Japanese automotive industry is expected to slow down after the crippling earthquake, which would crimp tyre demand and ultimately affect natural rubber demand; and (iv) more natural rubber latex will now be available since some rubber glove manufacturers have been switching to nitrile gloves.
We do not discount the possibility the oil price shooting past its record high of US$147 (RM444) per barrel given the continuing turmoil in the Middle East and the US intervention in recent days. We believe that the prices of all commodities will spike up, including that of latex.
Maintain “overweight”. Our top picks are Top Glove Corp Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd. Besides the fundamental reason for a potential fall in latex price, we think the share prices of these three companies have bottomed after correcting by 30% to 40% from their year highs and have experienced minimal sell-off since 4Q10, despite being hit by: (i) rising latex price to an all-time high of RM10.90/kg; (ii) unrest in the Middle East; and (iii) crash in the Japanese stock market. Hence, we think the downside risk is now limited and are advising investors to gradually accumulate on weakness.
We expect their share prices to recover once latex price begins on a downtrend and when the US dollar strengthens against the ringgit. — OSK Research, March 25
Sunday, March 27, 2011
Kossan ventures into cleanroom gloves
Written by Melody Song
Friday, 25 March 2011 14:58
KUALA LUMPUR: Kossan Rubber Industries Bhd has proposed an acquisition of a 51% stake in Cleanera HK Ltd from Inout Enterprise and Soode Optik Pte Ltd for US$3.06 million (RM9.27 million) in order to venture into clean-room gloves.
In a reply to a query by Bursa Malaysia yesterday, Kossan said Inout held 1.46 million Cleanera shares while Soode Optik had 158,300 shares respectively.
According to Kossan, cleanroom gloves yielded higher value-added gloves that would complement its core business of manufacturing and selling examination and medical gloves.
“The current facilities of Cleanera provide immediate services to the above cleanroom gloves,” it said.
On Wednesday, Kossan said it expected the acquisition to contribute positively towards its future earnings.
It added that the purchase consideration had not been paid yet, and based on the prevailing rate, the total sum would be RM9.29 million. “The latest time frame for full settlement is June 30, 2011,” it said, adding that the purchase would be financed by internally generated funds.
Cleanera is a private limited company based in Hong Kong principally involved in manufacturing clean-room products such as masks, wipes and gloves, while Inout Enterprise and Soode Optik are private companies based in Singapore.
“The unaudited management accounts of Cleanera for the year ended Dec 31, 2010 has a net worth of US$3 million,” said Kossan, adding that Cleanera was entitled to five trademarks in China, Japan, Malaysia and Singapore.
A glove analyst said it represented a good move for Kossan as a foray into clean-room gloves was a move up the value chain.
“Cleanroom gloves are high-end than the regular natural rubber gloves,” said the analyst, adding that at RM9.3 million, Kossan would be able to afford the acquisition.
Based on its balance sheet as at Dec 31, 2010, Kossan has a gearing of about 0.15 times as its borrowings stand at RM159.16 million while cash and bank balances are RM89.89 million.
For FY10 ended Dec 31, Kossan posted earnings of RM118.59 million on revenue of RM1.05 billion, which represented an improved year-on-year performance from net profit of RM67.34 million on revenue of RM842.14 million previously.
At present, Top Glove Corp Bhd also produces cleanroom gloves, which are used in laboratories and server rooms.
According to Top Glove’s website, cleanroom gloves provide contamination protection for the semiconductor, electronic, aerospace and biotech industries.
Friday, 25 March 2011 14:58
KUALA LUMPUR: Kossan Rubber Industries Bhd has proposed an acquisition of a 51% stake in Cleanera HK Ltd from Inout Enterprise and Soode Optik Pte Ltd for US$3.06 million (RM9.27 million) in order to venture into clean-room gloves.
In a reply to a query by Bursa Malaysia yesterday, Kossan said Inout held 1.46 million Cleanera shares while Soode Optik had 158,300 shares respectively.
According to Kossan, cleanroom gloves yielded higher value-added gloves that would complement its core business of manufacturing and selling examination and medical gloves.
“The current facilities of Cleanera provide immediate services to the above cleanroom gloves,” it said.
On Wednesday, Kossan said it expected the acquisition to contribute positively towards its future earnings.
It added that the purchase consideration had not been paid yet, and based on the prevailing rate, the total sum would be RM9.29 million. “The latest time frame for full settlement is June 30, 2011,” it said, adding that the purchase would be financed by internally generated funds.
Cleanera is a private limited company based in Hong Kong principally involved in manufacturing clean-room products such as masks, wipes and gloves, while Inout Enterprise and Soode Optik are private companies based in Singapore.
“The unaudited management accounts of Cleanera for the year ended Dec 31, 2010 has a net worth of US$3 million,” said Kossan, adding that Cleanera was entitled to five trademarks in China, Japan, Malaysia and Singapore.
A glove analyst said it represented a good move for Kossan as a foray into clean-room gloves was a move up the value chain.
“Cleanroom gloves are high-end than the regular natural rubber gloves,” said the analyst, adding that at RM9.3 million, Kossan would be able to afford the acquisition.
Based on its balance sheet as at Dec 31, 2010, Kossan has a gearing of about 0.15 times as its borrowings stand at RM159.16 million while cash and bank balances are RM89.89 million.
For FY10 ended Dec 31, Kossan posted earnings of RM118.59 million on revenue of RM1.05 billion, which represented an improved year-on-year performance from net profit of RM67.34 million on revenue of RM842.14 million previously.
At present, Top Glove Corp Bhd also produces cleanroom gloves, which are used in laboratories and server rooms.
According to Top Glove’s website, cleanroom gloves provide contamination protection for the semiconductor, electronic, aerospace and biotech industries.
Tuesday, March 15, 2011
Glovemakers' shares inflate
By Ooi Tee Ching
Share prices of rubber glovemakers shot up yesterday as investors foresee higher global demand for medical gloves after a two-week decline in rubber prices.
Following Japan's devastating 9-magnitude earthquake and tsunami last Friday, rubber futures on the Tokyo Commodity Exchange nosedived in anticipation of production halt among car and tyremakers.
Yesterday, the benchmark rubber contract on the Tokyo Commodity Exchange for August delivery fell more than 15 per cent, or 31.1 yen, to settle at 353 yen per kg (100 yen = RM3.75).
CIMB Investment Bank analyst Ivy Ng said demand for rubber could be hit in the near term due to the physical lack of access and potential disruption to tyre and car manufacturing plants in Japan.
"Also, potential buyers could stay on the sidelines hoping to snap up these commodities at lower prices due to short-term uncertainty in the market," she added.
Japan's rubber futures had plunged more than a third from a record 528.4 yen reached a month ago on February 17, following worsening Middle East tensions and slowing car sales in China, the world's largest rubber consumer.
Just last month, China's voracious demand for cars eased as surging petrol prices, the end of government subsidies and a major holiday took a toll on the world's biggest car market.
Taking the cue from Japan's rubber price plunge, Malaysian Rubber Board yesterday reported that tyre-grade SMR 20 tumbled 49.5 sen to RM11.89 per kg while latex-in-bulk fell 45.5 sen to RM8.61 per kg.
Kenanga Research foresees natural latex prices dropping further from an all-time high of RM10.90 per kg two weeks ago.
In its update to investors titled "Better Days Ahead?", the research house had a "neutral" outlook on the rubber glove sector and placed "buy" calls on Kossan Rubber Industries Bhd and Hartalega Holdings Bhd.
It said concerns over weak US dollar and costly natural latex prices had been overly exaggerated.
Glovemakers are in for good news should natural latex prices drop further to RM8 per kg, Kenanga Research added.
When contacted, Top Glove Corp Bhd executive director Lim Cheong Guan said the recent price plunge in natural latex had spurred demand for its rubber gloves.
"Demand has started to pick up again, our clients' inventory holdings are begining to normalise."
Yesterday, all rubber glovemakers' share prices shot up except for Hartalega, which fell 10 sen to RM5.50.
In a telephone interview, Hartalega managing director Kuan Kam Hon said investors may have been unduly worried by synthetic latex supply disruption from Japan.
"I would like to go on the record that we're receiving steady supply of nitrile latex from our suppliers in Japan. Their factories are in Kawasaki, far away from the area hit by the earthquake and tsunami.
"Our suppliers have also reassured us that there's enough buffer stocks in the months ahead at their Port Klang facility," Kuan added.
BANGKOK: The world's top rubber-producing countries, Thailand, Indonesia and Malaysia, will hold an urgent meeting this week to find ways to support prices that have collapsed this month, an senior industry official said yesterday.
The price of Thai USS3, a raw material for export grade rubber sheet (RSS3), fell to 90 baht a kg yesterday from 95 baht (100 baht = RM10.04) on Monday. That is half the record high of 180 baht hit in mid-February.
Rubber futures on the Tokyo Commodity Exchange (TOCOM), which tend to set global price trends, started falling this month when unrest in the Middle East raised concerns about the global economy and rubber demand.
Friday's earthquake in Japan added to these concerns. "We need to do something this week to stop prices from falling," Yium Tavarolit, acting chief executive of the International Rubber Consortium, said, adding that the meeting to discuss the measures will probably be held in Thailand.
"We will consider whether we should stop exporting for a while or cut production, as we used to do in the past, to help support prices." The consortium, which will coordinate the meeting, brings together rubber industry officials, exporters and government officials from the three countries that together account for 70 per cent of global rubber output.
Any decision by the IRCo would have to be ratified by the International Tripartite Rubber Corporation, which groups senior government officials from IRCo countries. TOCOM's benchmark rubber contract for August delivery hit a low of 335.0 yen (100 yen = RM3.75) a kg yesterday, 12 per cent down from Monday's close of 384.1 yen.
At that point, it had lost nearly 40 per cent from a record high of 535.7 yen hit in mid-February.
The benchmark settled at 353.0 yen a kg. TOCOM rubber futures had slumped on Monday, leading to a temporary halt in trade, as rumours circulated that some buyers had defaulted on shipments of physical rubber.
Thai RSS3 traded at a four-month low of US$4.18 to US$4.20 (US$1 = RM3.04) a kg yesterday, against record-high offers at US$6.40 in mid-February.
However, there were no reports of shipment cancellations.
When the global economy faced recession in late 2008, the top three rubber producers said they would cut shipments in 2009 to prop up export prices, which had fallen to around US$1.50 a kg.
However, the measure was effectively dropped when rubber prices recovered because of strong demand from the tyre industry in China and a gradual recovery in the global economy from the second half of 2009.
Thailand may draw up separate plans to intervene in the domestic market, partly to help the government win farmers' vote in a general election likely by July.
The government would do everything within its means to push the price of USS3 higher, Deputy Prime Minister Suthep Thuagsuban said yesterday, urging farmers not to sell at current levels.
"I suggest farmers keep their rubber for a while as the government is pushing prices up very soon, so please wait to sell at 120 baht a per kg, not at this low level," he told reporters. - Reuters
Share prices of rubber glovemakers shot up yesterday as investors foresee higher global demand for medical gloves after a two-week decline in rubber prices.
Yesterday, the benchmark rubber contract on the Tokyo Commodity Exchange for August delivery fell more than 15 per cent, or 31.1 yen, to settle at 353 yen per kg (100 yen = RM3.75).
CIMB Investment Bank analyst Ivy Ng said demand for rubber could be hit in the near term due to the physical lack of access and potential disruption to tyre and car manufacturing plants in Japan.
"Also, potential buyers could stay on the sidelines hoping to snap up these commodities at lower prices due to short-term uncertainty in the market," she added.
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Just last month, China's voracious demand for cars eased as surging petrol prices, the end of government subsidies and a major holiday took a toll on the world's biggest car market.
Taking the cue from Japan's rubber price plunge, Malaysian Rubber Board yesterday reported that tyre-grade SMR 20 tumbled 49.5 sen to RM11.89 per kg while latex-in-bulk fell 45.5 sen to RM8.61 per kg.
Kenanga Research foresees natural latex prices dropping further from an all-time high of RM10.90 per kg two weeks ago.
In its update to investors titled "Better Days Ahead?", the research house had a "neutral" outlook on the rubber glove sector and placed "buy" calls on Kossan Rubber Industries Bhd and Hartalega Holdings Bhd.
It said concerns over weak US dollar and costly natural latex prices had been overly exaggerated.
Glovemakers are in for good news should natural latex prices drop further to RM8 per kg, Kenanga Research added.
When contacted, Top Glove Corp Bhd executive director Lim Cheong Guan said the recent price plunge in natural latex had spurred demand for its rubber gloves.
"Demand has started to pick up again, our clients' inventory holdings are begining to normalise."
Yesterday, all rubber glovemakers' share prices shot up except for Hartalega, which fell 10 sen to RM5.50.
In a telephone interview, Hartalega managing director Kuan Kam Hon said investors may have been unduly worried by synthetic latex supply disruption from Japan.
"I would like to go on the record that we're receiving steady supply of nitrile latex from our suppliers in Japan. Their factories are in Kawasaki, far away from the area hit by the earthquake and tsunami.
"Our suppliers have also reassured us that there's enough buffer stocks in the months ahead at their Port Klang facility," Kuan added.
Top rubber producers' meet to prop up prices
BANGKOK: The world's top rubber-producing countries, Thailand, Indonesia and Malaysia, will hold an urgent meeting this week to find ways to support prices that have collapsed this month, an senior industry official said yesterday.
The price of Thai USS3, a raw material for export grade rubber sheet (RSS3), fell to 90 baht a kg yesterday from 95 baht (100 baht = RM10.04) on Monday. That is half the record high of 180 baht hit in mid-February.
Rubber futures on the Tokyo Commodity Exchange (TOCOM), which tend to set global price trends, started falling this month when unrest in the Middle East raised concerns about the global economy and rubber demand.
Friday's earthquake in Japan added to these concerns. "We need to do something this week to stop prices from falling," Yium Tavarolit, acting chief executive of the International Rubber Consortium, said, adding that the meeting to discuss the measures will probably be held in Thailand.
| |
Any decision by the IRCo would have to be ratified by the International Tripartite Rubber Corporation, which groups senior government officials from IRCo countries. TOCOM's benchmark rubber contract for August delivery hit a low of 335.0 yen (100 yen = RM3.75) a kg yesterday, 12 per cent down from Monday's close of 384.1 yen.
At that point, it had lost nearly 40 per cent from a record high of 535.7 yen hit in mid-February.
The benchmark settled at 353.0 yen a kg. TOCOM rubber futures had slumped on Monday, leading to a temporary halt in trade, as rumours circulated that some buyers had defaulted on shipments of physical rubber.
Thai RSS3 traded at a four-month low of US$4.18 to US$4.20 (US$1 = RM3.04) a kg yesterday, against record-high offers at US$6.40 in mid-February.
However, there were no reports of shipment cancellations.
When the global economy faced recession in late 2008, the top three rubber producers said they would cut shipments in 2009 to prop up export prices, which had fallen to around US$1.50 a kg.
However, the measure was effectively dropped when rubber prices recovered because of strong demand from the tyre industry in China and a gradual recovery in the global economy from the second half of 2009.
Thailand may draw up separate plans to intervene in the domestic market, partly to help the government win farmers' vote in a general election likely by July.
The government would do everything within its means to push the price of USS3 higher, Deputy Prime Minister Suthep Thuagsuban said yesterday, urging farmers not to sell at current levels.
"I suggest farmers keep their rubber for a while as the government is pushing prices up very soon, so please wait to sell at 120 baht a per kg, not at this low level," he told reporters. - Reuters
Wednesday, February 23, 2011
Kossan 4Q net profit up 21.4pct to RM29.45m on better product mix, margin
Written by Surin Murugiah of theedgemalaysia.com Wednesday, 23 February 2011 20:51
KUALA LUMPUR: KOSSAN RUBBER INDUSTRIES BHD [] net profit for the fourth quarter ended Dec 31, 2010 rose 21.4% to RM29.45 million from RM24.25 million a year ago, driven by the expansion in the company’s gloves division with better product mix and margin.
It said on Wednesday, Feb 23 revenue rose 11% to RM252.97 million from RM227.75 million. Earnings per share were 9.18 sen while net assets per share was RM1.40.
For the financial year ended Dec 31, 2010, Kossan’s net profit recorded an increase of 76.1% to RM118.59 million from RM67.33 million a year ago. Revenue rose 24.6% to RM1.05 billion from RM842.14 million.
Kossan said the results for 2010 were within expectations. “For the year, demand for gloves remains good and management is cautiously optimistic of consistent performance in the financial year of 2011,” it said.
KUALA LUMPUR: KOSSAN RUBBER INDUSTRIES BHD [] net profit for the fourth quarter ended Dec 31, 2010 rose 21.4% to RM29.45 million from RM24.25 million a year ago, driven by the expansion in the company’s gloves division with better product mix and margin.
It said on Wednesday, Feb 23 revenue rose 11% to RM252.97 million from RM227.75 million. Earnings per share were 9.18 sen while net assets per share was RM1.40.
For the financial year ended Dec 31, 2010, Kossan’s net profit recorded an increase of 76.1% to RM118.59 million from RM67.33 million a year ago. Revenue rose 24.6% to RM1.05 billion from RM842.14 million.
Kossan said the results for 2010 were within expectations. “For the year, demand for gloves remains good and management is cautiously optimistic of consistent performance in the financial year of 2011,” it said.
Tuesday, February 22, 2011
Margins of rubber glove firms pinched
By Ooi Tee Ching
High latex cost and weak US dollar have started to hurt the profit margins of rubber glove companies such as Supermax Corp Bhd and Latexx Partners Bhd, based on their recent quarterly results.
Most analysts, however, are still positive on Hartalega Holdings Bhd, which makes more synthetic rubber gloves than the natural rubber variant.
A sectoral analyst said she continues to have a "buy" call on Supermax's shares although the glovemaker's fourth quarter profits ended December 2010 of RM32.72 million was 14 per cent lower than a year ago.
"We have a 'buy' call because at current levels, Supermax's valuation is still attractive," she said when contacted by Business Times.
Her forecast is based on a conservative estimate of natural latex cost averaging at RM8.60 per kg and the US dollar trading at RM2.90.
She said natural latex consumption will continue to decline as more glove manufacturers join the bandwagon to ramp up nitrile gloves production.
"We'll only change our evaluation if natural latex becomes even more costlier and the US dollar weakens further. We're keeping our fair valuation of Supermax shares at RM6.30 on the basis of a price-to-earnings ratio of 11 times," she added.
OSK Research analyst Jason Yap, in his recent note to investors, also placed a "buy" call on Supermax.
"Our target price for Supermax remains unchanged at RM7.84 based on the existing price-to-earnings ratio of 13 times," he said.
Yap's top two rubber glove favourites are Supermax and Kossan Resources Industries Bhd.
"Supermax's valuation still stands out over some of its peers given its single-digit valuation.
"Going forward, we believe Supermax would be re-rated when natural latex price gets toppish, which we think would be sometime in May 2011 when the wintering season of rubber trees is over," he added.
An analyst from a bank-backed research house said she likes Hartalega's strong profit margin and estimates that the share price to rise as high as RM6.14.
Hartalega's third quarter profit ended December 2010 went up by 5.5 per cent to RM49.20 million from RM37.20 million a year ago.
It is able to make more profits than its rivals because 80 per cent of its total production are synthetic rubber gloves.
"The rise in nitrile latex prices is far less drastic than in natural latex and this is to the advantage of Hartalega when compared to its rivals," she said.
Also, Hartalega is the only rubber glovemaker that has automated its stripping and packing lines to lower its production cost and is seen the most efficient rubber glovemaker in the world.
"We like Hartalega because of its technological advancement over its competitors. We've raised our fair value of Hartalega to RM6.14 from RM5.64 on the basis of a price-to-earning ratio of 10.5 times," she added.
High latex cost and weak US dollar have started to hurt the profit margins of rubber glove companies such as Supermax Corp Bhd and Latexx Partners Bhd, based on their recent quarterly results.
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A sectoral analyst said she continues to have a "buy" call on Supermax's shares although the glovemaker's fourth quarter profits ended December 2010 of RM32.72 million was 14 per cent lower than a year ago.
"We have a 'buy' call because at current levels, Supermax's valuation is still attractive," she said when contacted by Business Times.
Her forecast is based on a conservative estimate of natural latex cost averaging at RM8.60 per kg and the US dollar trading at RM2.90.
 |
"We'll only change our evaluation if natural latex becomes even more costlier and the US dollar weakens further. We're keeping our fair valuation of Supermax shares at RM6.30 on the basis of a price-to-earnings ratio of 11 times," she added.
OSK Research analyst Jason Yap, in his recent note to investors, also placed a "buy" call on Supermax.
"Our target price for Supermax remains unchanged at RM7.84 based on the existing price-to-earnings ratio of 13 times," he said.
Yap's top two rubber glove favourites are Supermax and Kossan Resources Industries Bhd.
"Supermax's valuation still stands out over some of its peers given its single-digit valuation.
"Going forward, we believe Supermax would be re-rated when natural latex price gets toppish, which we think would be sometime in May 2011 when the wintering season of rubber trees is over," he added.
An analyst from a bank-backed research house said she likes Hartalega's strong profit margin and estimates that the share price to rise as high as RM6.14.
Hartalega's third quarter profit ended December 2010 went up by 5.5 per cent to RM49.20 million from RM37.20 million a year ago.
It is able to make more profits than its rivals because 80 per cent of its total production are synthetic rubber gloves.
"The rise in nitrile latex prices is far less drastic than in natural latex and this is to the advantage of Hartalega when compared to its rivals," she said.
Also, Hartalega is the only rubber glovemaker that has automated its stripping and packing lines to lower its production cost and is seen the most efficient rubber glovemaker in the world.
"We like Hartalega because of its technological advancement over its competitors. We've raised our fair value of Hartalega to RM6.14 from RM5.64 on the basis of a price-to-earning ratio of 10.5 times," she added.
Wednesday, February 16, 2011
Supermax counts on new income stream
Firm to sell medical disposal products made by other parties
By YVONNE TAN
yvonne@thestar.com.my
KUALA LUMPUR: Glove maker Supermax Corp Bhd is banking on a new income stream derived from global sales and marketing network to mitigate any effects of higher production cost.
Executive chairman and group managing director Datuk Seri Stanley Thai said the company would “aggressively globalise” its operations via its net work of about 700 distributors worldwide.
“We will sell and distribute medical disposal products t hat we do not manufacture such as surgical masks via these dist ributors.
»The new stream of income is expected to contribute 5% to our net profit this year« DATUK SERI STANLEY THAI “The new stream of income is expected to contribute 5% to our net profit this year,” Thai said after a media and analyst briefing on the company's prospects here yesterday.
At the briefing earlier, Thai said Supermax expected latex pri ces to drop to RM7.50 per kg th is year from RM10.60 now.
Supermax recently reported a 24.8% drop in its fourth-quarter net profit to RM32.7mil from RM43.5mil in the same quarter a year earlier largely on continuous high latex prices.
“Natural rubber latex prices are over-speculated and we expect to see a sharp fall in the second quarter of this year,” Thai said.
The price of the raw material has increased more than 70% in the past one year. Thai said 70% of Supermax's production lines were int er-switchable for natural late x and nitrile gloves.
“This year, nitrile powder-free gloves will make up 40% to 45% of our total glov es sold compa red with 30 % previously,” he said.
Supermax has an installed capacity of 17.6 bi llion pieces per annum. This year, the company plans to increase its product ion capacity by 4.1 billion to 21.7 billion pieces, according to a note by Kenanga Research.
Thai said selling prices, which were denominated in the greenback, were adjusted frequently to mitigate the impact of weak US dollar.
In notes to clients yesterday, analysts said Supermax's fourth-quarter results were largely within expectations.
“We expect a challenging year ahead for rubber glove makers, given the all-time high latex prices.
“Nevertheless, the demand for powder-free medical gloves is still going strong; moreover, distributors in the United States have been buying less and keeping their inventory levels at the lowest possible in the past few months; hence we believe buying will continue once they run out of stock,” Kenanga said.
The United States is Supermax's largest market, contributing 40% to its sales.
By YVONNE TAN
yvonne@thestar.com.my
KUALA LUMPUR: Glove maker Supermax Corp Bhd is banking on a new income stream derived from global sales and marketing network to mitigate any effects of higher production cost.
Executive chairman and group managing director Datuk Seri Stanley Thai said the company would “aggressively globalise” its operations via its net work of about 700 distributors worldwide.
“We will sell and distribute medical disposal products t hat we do not manufacture such as surgical masks via these dist ributors.
»The new stream of income is expected to contribute 5% to our net profit this year« DATUK SERI STANLEY THAIAt the briefing earlier, Thai said Supermax expected latex pri ces to drop to RM7.50 per kg th is year from RM10.60 now.
Supermax recently reported a 24.8% drop in its fourth-quarter net profit to RM32.7mil from RM43.5mil in the same quarter a year earlier largely on continuous high latex prices.
“Natural rubber latex prices are over-speculated and we expect to see a sharp fall in the second quarter of this year,” Thai said.
The price of the raw material has increased more than 70% in the past one year. Thai said 70% of Supermax's production lines were int er-switchable for natural late x and nitrile gloves.
“This year, nitrile powder-free gloves will make up 40% to 45% of our total glov es sold compa red with 30 % previously,” he said.
Supermax has an installed capacity of 17.6 bi llion pieces per annum. This year, the company plans to increase its product ion capacity by 4.1 billion to 21.7 billion pieces, according to a note by Kenanga Research.
Thai said selling prices, which were denominated in the greenback, were adjusted frequently to mitigate the impact of weak US dollar.
In notes to clients yesterday, analysts said Supermax's fourth-quarter results were largely within expectations.
“We expect a challenging year ahead for rubber glove makers, given the all-time high latex prices.
“Nevertheless, the demand for powder-free medical gloves is still going strong; moreover, distributors in the United States have been buying less and keeping their inventory levels at the lowest possible in the past few months; hence we believe buying will continue once they run out of stock,” Kenanga said.
The United States is Supermax's largest market, contributing 40% to its sales.
Tuesday, February 15, 2011
OSK Research: Supermax FY10 results within expectations, TP unchanged at RM7.84
Written by theedgemalaysia.com Wednesday, 16 February 2011 08:50
KUALA LUMPUR: OSK Research said Supermax Corp Bhd’s FY10 results were within expectations and as anticipated, the results were lower on-quarter owing to spiralling latex price and no improvement in forex.
The research house said on Wednesday, Feb 16 although the company is the closest to Top Glove in terms of product mix, it has managed to differentiate itself by having a higher OBM mix as well as distribution income to smoothen its manufacturing profits.
“Our target price for Supermax remains unchanged at RM7.84, based on the existing PER of 13x FY11 EPS. Supermax remains one of our top two picks for the sector besides Kossan. Although we maintain Neutral on the sector, Supermax’s valuation still stands out over some of its peers given its single-digit valuation.
“Going forward, we believe the stock would come in for a re-rating when latex price gets toppish, which we think would be sometime in May 2011 when the wintering season of rubber trees is over,” it said.
KUALA LUMPUR: OSK Research said Supermax Corp Bhd’s FY10 results were within expectations and as anticipated, the results were lower on-quarter owing to spiralling latex price and no improvement in forex.
The research house said on Wednesday, Feb 16 although the company is the closest to Top Glove in terms of product mix, it has managed to differentiate itself by having a higher OBM mix as well as distribution income to smoothen its manufacturing profits.
“Our target price for Supermax remains unchanged at RM7.84, based on the existing PER of 13x FY11 EPS. Supermax remains one of our top two picks for the sector besides Kossan. Although we maintain Neutral on the sector, Supermax’s valuation still stands out over some of its peers given its single-digit valuation.
“Going forward, we believe the stock would come in for a re-rating when latex price gets toppish, which we think would be sometime in May 2011 when the wintering season of rubber trees is over,” it said.
Monday, February 14, 2011
Supermax posts lower net profit
By LEONG HUNG YEE
Q4 result affected by latex costs and exchange rate
PETALING JAYA: Supermax Corp Bhd's net profit fell 24.8% to RM32.7mil for the fourth quarter ended Dec 31 from RM43.5mil previously due to the continuous high prices of latex and unfavourable exchange rates.
Revenue for the quarter hit RM232.7mil, an increase of 18.4% compared with RM196.4mil posted in the same period a year ago. Pre-tax profit fell to RM32.8mil from RM50.3mil and earnings per share eroded to 9.62 sen versus 16.22 sen previously.
The glove maker has proposed a tax exempt final dividend of 5% per ordinary share of 50 sen for the financial year ended Dec 31, 2010 subject to the approval by shareholders at the forthcoming AGM.
For the full year, Supermax's pre-tax profit rose to RM168.2mil from RM126.6mil. It recorded a 14.9% rise in turnover to RM923.2mil. Net profit rose 32.8% or 49.45 sen per share, for the period under review.
An analyst says glove makers have shown that they are able to pass on the cost of higher latex prices and weaker US dollar to end-consumers. The group said it had managed to achieve the profit guidance of RM168mil, as set out at the beginning of the year, despite the difficult operating environment.
Supermax said the rising costs of latex and weakening of the US dollar posed a challenge; nevertheless, its management had the experience to tackle the headwinds and minimise their impact.
“Glove prices are raised in tandem with latex price increases and management has taken steps to adjust glove prices on a more regular basis to pass through the cost increase,” it said in the notes accompanying its financial results.
Supermax believed the US dollar would not see a significant fall this year as it did last year and latex prices would correct to more reasonable levels this year.
“Moving forward, we expect demand to remain strong, driven by new usages for gloves, rising demand from developing countries that are growing more affluent and spending more on healthcare. More countries are also regulating their healthcare industry,” it said.
On its prospects for FY11, Supermax is targeting earnings growth of between 15% and 20% with its planned capacity growth and changing of product mix in line with market demand and price trends.
Meanwhile, analysts said the higher latex prices had affected the industry as a whole, eroding their margins while a situation of oversupply and normalising demand prevailed.
However, they were positive on rubber glove makers which still enjoyed robust demand from the traditional healthcare as well as new segments such as the food and services industry.
An analyst said Supermax's latest quarterly results was within its expectations but slightly below market consensus. “Glove makers have shown that they are able to pass on the cost of higher latex prices and weaker US dollar to end-consumers,” he said.
According to Bloomberg, Supermax's net profit for FY10 accounted for about 95% of the consensus estimates for FY10. Bloomberg's consensus estimates expect Supermax to post RM195.4mil in net profit for the full year in FY11.
In an earlier report, CIMB research believed Supermax might report an 8% to 21% quarter-on-quarter decline in fourth quarter net profit to RM30mil to RM35mil. It implied a FY10 net profit of RM165mil to RM170mil or a shortfall of 8% to 10% against its forecast of RM183.8mil and 5% to 7% against consensus.
The research house remained positive of Supermax's long-term earnings outlook and would not change its recommendation when the results were released.
Earlier, glove companies reported mixed earnings. Hartalega Holdings Bhd had posted a higher net profit of RM49.2mil for the third quarter ended Dec 31, 2010, from RM37.2mil. a year ago, while its revenue rose to RM188.1mil from RM148.6mil.
The higher profit was in line with the group's continuous expansion in production capacity, increase in demand, effective cost control and improvement in production processes.
Meanwhile, Top Glove Corp Bhd posted a 44% drop in net profit to RM36mil for the first quarter ended Nov 30, compared with RM65.2mil previously due to persistently high latex prices and the continued weakening of the US dollar coupled with the time lag in passing on the higher costs to its customers. Its revenue stood at RM491.5mil against RM472.3mil previously.
Q4 result affected by latex costs and exchange rate
PETALING JAYA: Supermax Corp Bhd's net profit fell 24.8% to RM32.7mil for the fourth quarter ended Dec 31 from RM43.5mil previously due to the continuous high prices of latex and unfavourable exchange rates.
Revenue for the quarter hit RM232.7mil, an increase of 18.4% compared with RM196.4mil posted in the same period a year ago. Pre-tax profit fell to RM32.8mil from RM50.3mil and earnings per share eroded to 9.62 sen versus 16.22 sen previously.
The glove maker has proposed a tax exempt final dividend of 5% per ordinary share of 50 sen for the financial year ended Dec 31, 2010 subject to the approval by shareholders at the forthcoming AGM.
For the full year, Supermax's pre-tax profit rose to RM168.2mil from RM126.6mil. It recorded a 14.9% rise in turnover to RM923.2mil. Net profit rose 32.8% or 49.45 sen per share, for the period under review.
An analyst says glove makers have shown that they are able to pass on the cost of higher latex prices and weaker US dollar to end-consumers.Supermax said the rising costs of latex and weakening of the US dollar posed a challenge; nevertheless, its management had the experience to tackle the headwinds and minimise their impact.
“Glove prices are raised in tandem with latex price increases and management has taken steps to adjust glove prices on a more regular basis to pass through the cost increase,” it said in the notes accompanying its financial results.
Supermax believed the US dollar would not see a significant fall this year as it did last year and latex prices would correct to more reasonable levels this year.
“Moving forward, we expect demand to remain strong, driven by new usages for gloves, rising demand from developing countries that are growing more affluent and spending more on healthcare. More countries are also regulating their healthcare industry,” it said.
On its prospects for FY11, Supermax is targeting earnings growth of between 15% and 20% with its planned capacity growth and changing of product mix in line with market demand and price trends.
Meanwhile, analysts said the higher latex prices had affected the industry as a whole, eroding their margins while a situation of oversupply and normalising demand prevailed.
However, they were positive on rubber glove makers which still enjoyed robust demand from the traditional healthcare as well as new segments such as the food and services industry.
An analyst said Supermax's latest quarterly results was within its expectations but slightly below market consensus. “Glove makers have shown that they are able to pass on the cost of higher latex prices and weaker US dollar to end-consumers,” he said.
According to Bloomberg, Supermax's net profit for FY10 accounted for about 95% of the consensus estimates for FY10. Bloomberg's consensus estimates expect Supermax to post RM195.4mil in net profit for the full year in FY11.
In an earlier report, CIMB research believed Supermax might report an 8% to 21% quarter-on-quarter decline in fourth quarter net profit to RM30mil to RM35mil. It implied a FY10 net profit of RM165mil to RM170mil or a shortfall of 8% to 10% against its forecast of RM183.8mil and 5% to 7% against consensus.
The research house remained positive of Supermax's long-term earnings outlook and would not change its recommendation when the results were released.
Earlier, glove companies reported mixed earnings. Hartalega Holdings Bhd had posted a higher net profit of RM49.2mil for the third quarter ended Dec 31, 2010, from RM37.2mil. a year ago, while its revenue rose to RM188.1mil from RM148.6mil.
The higher profit was in line with the group's continuous expansion in production capacity, increase in demand, effective cost control and improvement in production processes.
Meanwhile, Top Glove Corp Bhd posted a 44% drop in net profit to RM36mil for the first quarter ended Nov 30, compared with RM65.2mil previously due to persistently high latex prices and the continued weakening of the US dollar coupled with the time lag in passing on the higher costs to its customers. Its revenue stood at RM491.5mil against RM472.3mil previously.
Friday, January 28, 2011
Kossan is as good as it gets
Written by Financial Daily Friday, 28 January 2011 12:02
Kossan Rubber Industries Bhd
(Jan 25, RM3.18)
Maintain buy with target price RM4.28: Kossan recorded a significantly higher revenue and net profit for 9MFY10 compared with the same period in FY09.
Revenue surged by 30% year-on-year while net profit rose even more strongly, jumping 54% year-on-year (y-o-y) to RM41.3 million from RM26.8 million recorded in 9MFY09. The higher net profit and revenue were lifted by higher sales volume and selling price, in tandem with the higher latex price and weaker US dollar against the ringgit. In addition, a good strategic move by the company to focus more on better margin products (such as nitrile gloves) has benefited its bottom line as the current cost for nitrile is more stable than the cost of latex which skyrocketed in 2010.
Kossan recorded an impressive 90% to 95% utilisation rate in FY05 to FY09 thanks to its strategy of supplying rubber gloves at optimum level. Thus, we foresee the company will benefit from any normalising of demand in the glove industry. Admittedly, there have been some oversupply issues as a result of normalising demand as distributors increased their inventory during the H1N1 influenza A outbreak last year. However, we believe demand will keep growing in the coming years. Thus, Kossan is aiming to add more production lines, a growth of 10% to 30% for FY11 and FY12. This will help the company to cater for the rising global demand that is expected to grow by 8% to 10% in FY10/FY12.
Other than the gloves division, the technical rubber products (TRPs) division has contributed to Kossan’s earnings. This segment contributes about 20% of the group’s annual revenue. For the cumulative 9MFY10 period, this division contributed RM5.9 million (against RM1.6 million in 9MFY09) to its bottom line as demand from industrial sectors has shown encouraging improvement recently. This segment will benefit from the turnaround in the auto sector, especially from the large exporting countries. Close to 60% of TRPs sales are meant for export while the remaining 40% are sold domestically.
With up to 99% focus on the medical sector, it is not surprising to learn that the nitrile gloves segment has been contributing around 80% of Kossan’s total revenue. Currently, more than 40% of its production mix comes from nitrile and powder-free, with the balance 20% from the powdered latex gloves. The company will eventually increase its production mix to 50% nitrile gloves due to the low raw material cost compared with latex. In addition, the volatility of the latex price, especially for latex-based powdered and powder-free gloves, and the uncertain future latex price will drive customers to demand more nitrile gloves as the price is more stable. However, the company will still provide latex-based gloves as the demand for such gloves is higher than for nitrile gloves.
We are keeping our forecast unchanged as updates from management are largely in sync with our assumptions. We maintain our “buy” call on this counter with target price of RM4.28 based on an unchanged target PER of 10 times (at a 10% discount to Kossans three-year average PER of 11 times) to FY11 EPS of 42.8 sen. We remain positive on the industry’s demand side as this will be underpinned by: (i) the expected growth in the global demand for rubber gloves by 8% to 10% in FY10-FY12 on the back of resilient demand from the healthcare segment; and (ii) the expected liberalisation of the healthcare industry in major economies, especially China and India to be followed by other countries in the Americas, which would drive higher private healthcare spending. — BIMB Securities Research, Jan 27
This article appeared in The Edge Financial Daily, January 28, 2011.
Kossan Rubber Industries Bhd
(Jan 25, RM3.18)
Maintain buy with target price RM4.28: Kossan recorded a significantly higher revenue and net profit for 9MFY10 compared with the same period in FY09.
Revenue surged by 30% year-on-year while net profit rose even more strongly, jumping 54% year-on-year (y-o-y) to RM41.3 million from RM26.8 million recorded in 9MFY09. The higher net profit and revenue were lifted by higher sales volume and selling price, in tandem with the higher latex price and weaker US dollar against the ringgit. In addition, a good strategic move by the company to focus more on better margin products (such as nitrile gloves) has benefited its bottom line as the current cost for nitrile is more stable than the cost of latex which skyrocketed in 2010.
Kossan recorded an impressive 90% to 95% utilisation rate in FY05 to FY09 thanks to its strategy of supplying rubber gloves at optimum level. Thus, we foresee the company will benefit from any normalising of demand in the glove industry. Admittedly, there have been some oversupply issues as a result of normalising demand as distributors increased their inventory during the H1N1 influenza A outbreak last year. However, we believe demand will keep growing in the coming years. Thus, Kossan is aiming to add more production lines, a growth of 10% to 30% for FY11 and FY12. This will help the company to cater for the rising global demand that is expected to grow by 8% to 10% in FY10/FY12.
Other than the gloves division, the technical rubber products (TRPs) division has contributed to Kossan’s earnings. This segment contributes about 20% of the group’s annual revenue. For the cumulative 9MFY10 period, this division contributed RM5.9 million (against RM1.6 million in 9MFY09) to its bottom line as demand from industrial sectors has shown encouraging improvement recently. This segment will benefit from the turnaround in the auto sector, especially from the large exporting countries. Close to 60% of TRPs sales are meant for export while the remaining 40% are sold domestically.
With up to 99% focus on the medical sector, it is not surprising to learn that the nitrile gloves segment has been contributing around 80% of Kossan’s total revenue. Currently, more than 40% of its production mix comes from nitrile and powder-free, with the balance 20% from the powdered latex gloves. The company will eventually increase its production mix to 50% nitrile gloves due to the low raw material cost compared with latex. In addition, the volatility of the latex price, especially for latex-based powdered and powder-free gloves, and the uncertain future latex price will drive customers to demand more nitrile gloves as the price is more stable. However, the company will still provide latex-based gloves as the demand for such gloves is higher than for nitrile gloves.
We are keeping our forecast unchanged as updates from management are largely in sync with our assumptions. We maintain our “buy” call on this counter with target price of RM4.28 based on an unchanged target PER of 10 times (at a 10% discount to Kossans three-year average PER of 11 times) to FY11 EPS of 42.8 sen. We remain positive on the industry’s demand side as this will be underpinned by: (i) the expected growth in the global demand for rubber gloves by 8% to 10% in FY10-FY12 on the back of resilient demand from the healthcare segment; and (ii) the expected liberalisation of the healthcare industry in major economies, especially China and India to be followed by other countries in the Americas, which would drive higher private healthcare spending. — BIMB Securities Research, Jan 27
This article appeared in The Edge Financial Daily, January 28, 2011.
Tuesday, January 11, 2011
RHB Research maintains Top Glove FV at RM4.10
KUALA LUMPUR: RHB Research Institute is maintaining its fair value for Top Glove Corp Bhd at RM4.10 based on unchanged target CY11 PER of 12.5 times.
“We believe the near-term outlook for Top Glove remains challenging given the longer time frame now required to pass on the higher cost and lower proportion of cost increase that can be passed on to its customers as demand for rubber gloves continues to remain weak,” it said on Wednesday, Jan 12.
RHB Research said there was no change to its Underperform call on the stock.
To recap, 1Q11 revenue rose 4.1% on-year on the back of the upward revision in selling prices to partially pass on the rising latex cost and weakening RM. 1Q11 net profit, however, fell 45% on-year due to margin contraction (EBITDA margin fell 9.5%-pts on-year) resulting from the time lag in passing on the higher latex cost and weakening US$.
During a briefing on Tuesday, RHB Research said Top Glove management mentioned that the time lag could continue for the next 1-2 quarters ahead as latex price is still at a high (currently at RM9.81/kg).
Although typically glove manufacturers are able to pass on the higher cost, the time lag for Top Glove to pass on the higher cost is now longer (currently 3-6 months, as compared to 1-2 months previously) as customers are less willing to absorb higher prices given the ample capacity available in the industry following the H1N1 pandemic last year.
Apart from the longer time lag, Top Glove is now only able to pass on a lower proportion of the cost increase to their customers (previously around 80% is passed on, as compared to 60% currently).
“Nevertheless, they opined that latex prices should start to ease in the next 3-4 quarters ahead as fresh new supply would be coming into the market from Malaysia, Cambodia and Vietnam and seasonality effects,” said RHB Research.
“We believe the near-term outlook for Top Glove remains challenging given the longer time frame now required to pass on the higher cost and lower proportion of cost increase that can be passed on to its customers as demand for rubber gloves continues to remain weak,” it said on Wednesday, Jan 12.
RHB Research said there was no change to its Underperform call on the stock.
To recap, 1Q11 revenue rose 4.1% on-year on the back of the upward revision in selling prices to partially pass on the rising latex cost and weakening RM. 1Q11 net profit, however, fell 45% on-year due to margin contraction (EBITDA margin fell 9.5%-pts on-year) resulting from the time lag in passing on the higher latex cost and weakening US$.
During a briefing on Tuesday, RHB Research said Top Glove management mentioned that the time lag could continue for the next 1-2 quarters ahead as latex price is still at a high (currently at RM9.81/kg).
Although typically glove manufacturers are able to pass on the higher cost, the time lag for Top Glove to pass on the higher cost is now longer (currently 3-6 months, as compared to 1-2 months previously) as customers are less willing to absorb higher prices given the ample capacity available in the industry following the H1N1 pandemic last year.
Apart from the longer time lag, Top Glove is now only able to pass on a lower proportion of the cost increase to their customers (previously around 80% is passed on, as compared to 60% currently).
“Nevertheless, they opined that latex prices should start to ease in the next 3-4 quarters ahead as fresh new supply would be coming into the market from Malaysia, Cambodia and Vietnam and seasonality effects,” said RHB Research.
Thursday, December 30, 2010
G-lovely growth
Malaysia is set to post record rubber glove exports for the eighth straight year in 2010, driven by higher global demand for medical gloves.
Rubber glove exports are due to grow 23 per cent to RM8.8 billion this year, said The Malaysian Rubber Glove Manufacturers Association (Margma).
For the last 15 years, Malaysia has been the world's top supplier of rubber gloves. Last year, the country exported close to 100 billion pieces of rubber gloves to more than 180 countries.
This volume makes up two-thirds of the global market for rubber gloves. Healthcare products like medical gloves continue to see strong demand despite the current lacklustre global economic growth.
"Rubber gloves, be they natural rubber or synthetic, are a necessity in the healthcare and food-handling sectors," Margma president Lee Kim Meow said in a recent interview.
"We expect further growth on the back of rising healthcare awareness in emerging markets, especially in China, India and the Latin American countries," he said.
This is because emerging markets currently spend less on healthcare compared with developed nations like the US, Europe and Japan.
Despite the strong headwinds buffeting the industry, Lee is optimistic that next year's global glove exports from Malaysia will expand by 10 per cent to 108 billion pieces.
Latex cost, which used to be 55 per cent of the total production cost, has swollen to more than 65 per cent since the sudden spike in natural rubber prices over the last three months.
Currently, the average rubber glove selling price is at US$32 per 1,000 pieces, about 23 per cent higher than a year ago.
Lee said Margma members are likely to keep raising rubber glove prices in tandem with the rising latex prices and the weakening US dollar.
Natural rubber latex prices have risen by 65 per cent from an average of RM6 a kg from a year ago. Yesterday, it closed at RM9.89 a kg.
The US dollar, currently trading at RM3.09, has also weakened against the ringgit by 10 per cent compared with RM3.45 about 10 months ago.
Costly natural rubber latex have prompted many glovemakers to produce less natural rubber gloves and more of the synthetic variant.
This trend bodes well with Kuala Lumpur Kepong Bhd (KLK) as it seeks to tighten its grip on the world’s supply of nitrile latex, which is mainly used to make synthetic gloves.
KLK, which holds 19 per cent of Yule Catto & Co plc, supports the UK firm’s buy of Germany’s PolymerLatex Group for e443 million (RM1.8 billion). Chemical maker Yule Catto, listed on the London Stock Exchange, is the owner of the Synthomer Group’s polymers business.
Synthomer’s unit in Malaysia runs a 130,000-tonne-per-year nitrile plant in Kluang, Johor. On the other hand, PolymerLatex operates a 100,000-tonne-a-year plant in Pasir Gudang, Johor.
When asked to comment on KLK and Yule Catto’s decision, Lee replied: “We welcome the move. Our members look forward to see how Yule Catto can offer a wider variety of feedstock to work with.
By Ooi Tee Ching
“We’re actually not short of nitrile latex suppliers,” he said, adding that Bangkok Synthetics Co Ltd is planning to put up a 110,000-tonne a year plant at Rayong province in southern Thailand.
The plant is scheduled to supply nitrile latex to rubber glove makers in Thailand, Malaysia and Indonesia by the third quarter of 2012.
For the last 15 years, Malaysia has been the world's top supplier of rubber gloves. Last year, the country exported close to 100 billion pieces of rubber gloves to more than 180 countries.
This volume makes up two-thirds of the global market for rubber gloves. Healthcare products like medical gloves continue to see strong demand despite the current lacklustre global economic growth.
"Rubber gloves, be they natural rubber or synthetic, are a necessity in the healthcare and food-handling sectors," Margma president Lee Kim Meow said in a recent interview.
This is because emerging markets currently spend less on healthcare compared with developed nations like the US, Europe and Japan.
Despite the strong headwinds buffeting the industry, Lee is optimistic that next year's global glove exports from Malaysia will expand by 10 per cent to 108 billion pieces.
Latex cost, which used to be 55 per cent of the total production cost, has swollen to more than 65 per cent since the sudden spike in natural rubber prices over the last three months.
Currently, the average rubber glove selling price is at US$32 per 1,000 pieces, about 23 per cent higher than a year ago.
Lee said Margma members are likely to keep raising rubber glove prices in tandem with the rising latex prices and the weakening US dollar.
Natural rubber latex prices have risen by 65 per cent from an average of RM6 a kg from a year ago. Yesterday, it closed at RM9.89 a kg.
The US dollar, currently trading at RM3.09, has also weakened against the ringgit by 10 per cent compared with RM3.45 about 10 months ago.
Costly natural rubber latex have prompted many glovemakers to produce less natural rubber gloves and more of the synthetic variant.
This trend bodes well with Kuala Lumpur Kepong Bhd (KLK) as it seeks to tighten its grip on the world’s supply of nitrile latex, which is mainly used to make synthetic gloves.
KLK, which holds 19 per cent of Yule Catto & Co plc, supports the UK firm’s buy of Germany’s PolymerLatex Group for e443 million (RM1.8 billion). Chemical maker Yule Catto, listed on the London Stock Exchange, is the owner of the Synthomer Group’s polymers business.
Synthomer’s unit in Malaysia runs a 130,000-tonne-per-year nitrile plant in Kluang, Johor. On the other hand, PolymerLatex operates a 100,000-tonne-a-year plant in Pasir Gudang, Johor.
When asked to comment on KLK and Yule Catto’s decision, Lee replied: “We welcome the move. Our members look forward to see how Yule Catto can offer a wider variety of feedstock to work with.
By Ooi Tee Ching
“We’re actually not short of nitrile latex suppliers,” he said, adding that Bangkok Synthetics Co Ltd is planning to put up a 110,000-tonne a year plant at Rayong province in southern Thailand.
The plant is scheduled to supply nitrile latex to rubber glove makers in Thailand, Malaysia and Indonesia by the third quarter of 2012.
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