Supermax shares rise 7% on KLCI inclusion


PROFIT-SEEKING investors are likely to favour Supermax Corp Bhd which was recently elevated to the FTSE Bursa Malaysia KLCI (FBM KLCI) constituent stocks following the semi-annual review of the FBM Index series.

At a market capitalisation of RM21.6 million, Supermax share price rose 7.14% to RM8.25 at yesterday’s close.

Malacca Securities Sdn Bhd head of research Loui Low said the glove industry emerged as the most lucrative business, with the top four local manufacturers Top Glove Corp Bhd, Hartalega Holdings Bhd,

Kossan Rubber Industries Bhd and Supermax dominating the local bourse this year at a market capitalisation of more than RM140 billion combined amid the Covid-19 pandemic.

He said Supermax’s inclusion in KLCI will likely pave the way for other players to be included in the constituents list as well.

“Kossan Rubber is likely to be included in the FBM KLCI index, but we will need to wait and see next year for any improvement of its share price.

“At this moment, it may not be the case as it has fallen to below 25,” he told The Malaysian Reserve (TMR).

Low believes the glove sector to remain positive from the business point of view given higher demand for gloves under this Covid-19 pandemic.

“Downside risk will be strengthening of the ringgit and earlier than expected use of Covid-19 vaccine,” he added.

MIDF Research analyst Ng Bei Shan maintained her ‘Buy’ recommendation on Supermax with a target price of RM13.83.

“The inclusion of Supermax into the FBM KLCI is positive for the company as it raises Supermax’s company profile and may attract more investors who invest based on the index.

“Currently, we’re still positive on the sector as demand for rubber gloves still exceeds supply,” she told TMR.

She said downside risks to the sector include an earlier than expected end to the pandemic once vaccine programmes rolled out.

An analyst with a local brokerage firm said the news on Supermax is not surprising as the market had been discussing this for a few months.

“Maybe Supermax will see some fund flow into it, but it could be offset by decent outflow.

“I don’t think other glove companies will be included in FBM KLCI anytime soon as glove hype in the market is tapering off,” he told TMR.

KAF Investment Bank Bhd analyst Nabil Fikri Zainoodin shared his view solely on the downside risk/issues investors need to consider in buying glove stocks.

According to Nabil Fikri, against the backdrop of exceptionally strong demand for examination gloves due to the pandemic, glove players have churned super-profits in the past few quarters.

However, he cautioned this record profit may not be sustainable considering the slew of new entrants and sudden hike on material costs.