Company under research: Supermax Corporation (MK)
Sector : Glove manufacturing
Date of research : 20 May 2016
Current price : MYR 2.59
Target price : MYR 5.30
Under the glove manufacturing universe under our research, we advocate an add call to Supermax Corporation (MK) due to sever undervaluation of the stock. Based on our valuation, Supermax is worth MYR 5.30 assuming earnings sustain at a level of MYR38 million each quarter.
Based on our channel checks, Supermax is likely to report an earnings of between circa MYR44 million to MYR48 million on 25 May 2016. We believe that Supermax has been able to raise its average selling prices ("ASP") to customers to mitigate the decline in US dollar value. We continue to believe that Supermax's earnings will remain resillent due to continued weakening of the Ringgit.
We advise investors to accumulate shares in Supermax as its low valuation serves as a golden opportunity for investors.
We do not see much opportunities on the Malaysian local bourse, even though we continue to like the following stocks:
1. Supermax Corporation Berhad (Most undervalued ASEAN stock under our research, multi year expansion, to continue to reap benefit from weakening Ringgit)
2. IOI Corporation Berhad (Battered down valuation, strong corporate governance, to benefit from CPO price recovery)
3. Top Glove Corporation Berhad (Largest glove manufacturer in the world, to continue to reap benefit from weakening Ringgit)
4. Karex Berhad (Monopolises condom market, to continue to reap benefit from weakening Ringgit)
5. Petronas Chemicals Berhad (To continue to reap benefit from low crude prices)
6. Globetronics Berhad (Battered down valuation)
7. Kossan Rubber Industries Berhad (To continue to reap benefit from weakening of Ringgit, multi year expansion)
8. Eco World Development Berhad (Multi year expansion with strong leadership team)
9. Inari Amertron Berhad (Channel checks suggest multi year expansion)
10. Public Bank Berhad (Resilent earnings growth and strong corporate governance)
We advise investors to avoid the following stocks:
1. CIMB Bank Berhad (Exclusion from MSCI index, loans growth slow down, perceived political sentiment from investors)
2. Maybank Berhad (Exclusion from MSCI index, loan growth slow down, volatile ASEAN currencies to hit earnings)
3. Cahya Mata Sarawak Berhad (Perceived political sentiment from investors, lack of solid corporate governance, erratic earnings)
4. Sarawak Cable Berhad (Perceived political sentiment from investors, lack of solid corporate governance)
5. DRB HICOM Berhad (Higher cost of imports, automobile sales slow down, perceived political sentiment from investors)
6. Berjaya Auto Berhad (Higher cost of imports, automobile sales slow down)
7. VS Industry Berhad (Lack of business direction from management, core earnings lack focus)
8. UMWOG Berhad (Low crude prices to hit earnings, higher impairment, low utilisation, high fixed costs)
9. Focus Lumber Berhad (Erratic earnings, lack of clarity from management)
10. SapuraKencana Petroleum Berhad (Low crude prices to hit earnings, higher impairment, high fixed costs, efforts to downsize company denting investor sentiment)
http://klse.i3investor.com/blogs/DannyTanSiongKee/96916.jsp
