Profit-taking wipes out RM10b of glovemakers’ valuations

by FARA AISYAH / pic by TMR FILE

RUBBER glovemaker counters were dragged down by sustained selling and were among the top losers on the local bourse with some RM10 billion wiped off from the six major counters in trading yesterday.

Glove counters comprising Top Glove Corp Bhd, Hartalega Holdings Bhd, Kossan Rubber Industries Bhd, Supermax Corp Bhd, Comfort Gloves Bhd and Careplus Group Bhd experienced profit-taking despite the sharp earnings rise reported by Comfort Gloves for its second quarter on Monday.

Malacca Securities Sdn Bhd equity research analyst Kenneth Leong said investors, in general, are exiting their investments before the end of loan moratorium in September.

“The selling activities are relatively in tandem with the negative sentiment across the board as certain investors are starting to pull out from the equity market ahead of the end of the blanket loan moratorium,” he told The Malaysian Reserve yesterday.

Kossan was the top loser yesterday, closing RM1.20 or 8.76% lower to RM12.50. Top Glove lost 64 sen or 7.73% to RM7.64, while Supermax declined 59 sen or 6.56% to RM8.41.

Hartalega was down 40 sen or 2.86% to RM13.60 while Careplus fell 24 sen or 7.77% to RM2.85. Other healthcare thematic players like Adventa Bhd dropped by 20 sen or 8.89% to RM2.05 while Apex Healthcare Bhd dipped 14 sen or 4.36% to RM3.07.

Comfort Gloves’ share price decreased 14 sen or 3.39% to RM3.99. “Comfort Gloves fell mainly due to the ‘sell on the news’ strategy,” Leong said.

He added that the strategy was in use by investors as evident in the price action noticed at Supermax and Top Glove who experienced declines in share price despite their stellar quarterly results.

Comfort Gloves’ earnings in the second quarter ended July 31, 2020 (2Q21), jumped more than six-fold to RM42.8 million from RM7.12 million last year due to higher sales volume at significantly higher average selling prices (ASPs) and better economy of scales.

Margins improved from 6% in 2Q20 to 22% in the recent quarter. Quarterly revenue rose 68.27% year-on-year to RM197.95 million.

RHB Investment Bank Bhd analyst Alan Lim said the glove maker’s net profit for the quarter beat expectations.

“In the near term, we expect Comfort Gloves to register a stronger set of results in 3Q21 in line with the higher ASP trend in the industry.

“In the long run, the company is a beneficiary of the long-term uptrend of gloves consumption globally,” he said in a note yesterday.

RHB Investment Bank has increased the FY21 to FY23 earnings forecast by 63% to 103% on higher ASP, which is in line with the industry trend.

The firm has maintained its ‘Buy’ call on Comfort Gloves with a higher target price of RM5.70, from RM4.80 previously.

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