Glove stocks take a jab from vaccine rollout

The recent hype over the arrival of vaccines has somewhat stoked a general sentiment that gloves may not be needed as much as before


AS THE National Covid-19 Immunisation programme kicked off in the country yesterday, selling pressures for glove counters heighten as reflected in the sustained decline of glovemakers’ share price.

Despite experiencing a rally last year due to the pandemic and greater demand for rubber gloves at higher pricing power, the vaccine rollout, which will lower the risk of Covid-19 infections nationwide, has impacted the sentiment surrounding the counters as gloves would no longer be seen as part of the essential component in the fight against the pandemic.

Top Glove Corp Bhd closed 44 sen or 7.76% lower yesterday at RM5.23, valuing the company at RM42.9 billion.

The group has lost some RM31.5 billion in six months where it was valued at RM74.4 billion on Aug 24, 2020.

Hartalega Holdings Bhd closed 66 sen or 5.97% lower at RM10.40 yesterday with a market capitalisation of RM35.65 billion.

Over the last six months, about RM24 billion of its market capitalisation has been wiped off from RM60.03 billion it registered in August last year.

Bank Islam Malaysia Bhd economist Adam Mohamed Rahim said prices of glove counters could go lower amid dampened investor sentiment, but it would not dip to as low as pre-Covid levels as there is now a higher hygiene awareness among the public.

“Perhaps the recent hype over the arrival of vaccine on Malaysian shores has somewhat stoked a general sentiment that gloves may not be needed as much as before when the pandemic struck the globe.

“Nevertheless, usage of gloves is expected to remain heightened as hygiene awareness has substantially increased due to the pandemic and new variants may warrant caution,” he told The Malaysian Reserve (TMR) yesterday.

He said although glove stocks are seeing a decline in value now, among factors that could prevent further drop in prices would be the delayed journey for the country to achieve herd immunity. “There have been concerns from certain groups of people whereby they would rather wait to get vaccinated while waiting for further clarity on the side effects that have been made widely known to the public.

“Such instances would prolong the nation’s journey to reach herd immunity and could likely be a catalyst to sustain the sentiment of the glove sector,” he added.

Malacca Securities Sdn Bhd head of research Loui Low told TMR that any positive news from the World Health Organisation regarding the vaccine would further dampen the value of glovemakers.

The effectiveness rate of the vaccine and the global success in fighting the pandemic would eventually hurt stock prices even more.

“Glove counters will remain negative for the time being as the trend is still pointing downwards. There is no guide where the price would eventually lead to, but for now, it is just going down.

“If there is no pandemic, it will continue to decline,” he said, with money moving into recovery cyclicals.

He said a strong average selling price (ASP) for the glove stocks would prevent the share price from slipping, however, market players most likely looking forward to the earnings that can be generated up until 2022.

Areca Capital Sdn Bhd CEO Danny Wong said the decline in the share prices is happening as the market is concerned about their revenue stability after this year.

“I think they are affected by sentiment, but its (glove stocks) value over the next 12 months should be good,” he told TMR.

Meanwhile, Rubberex Corp Bhd’s net profit surged 1430.3% year-on-year (YoY) for its fourth quarter ended Dec 31, 2020 (4Q20), to RM59.44 million from RM3.88 million a year prior on the back of strong demand for disposable gloves, higher ASP for gloves and improved production efficiencies.

It clocked in a revenue of RM152.83 million, up 203.8% YoY from RM50.31 million in 4Q19.

For the whole financial year, the group’s net profit increased 1,055.3% YoY to RM131.18 million from RM11.35 million. Revenue for the group last year rose 90.4% to RM416.29 million against RM218.64 million in 2019.

In its Bursa Malaysia filing yesterday, the company noted that it expected to be in an “even stronger position” this year as the orderbook for 2.5 billion pieces of nitrile disposable gloves has been fully taken up.

Despite the performance, Rubberex closed four sen or 3.03% lower at RM1.28 yesterday, valuing the company at RM1.07 billion.

Read our previous report here

Glove stocks under pressure from vaccine rollout