[ SUPERMAX CORP BHD ] - Golden Chance After Huge Plunge ??? - J4 Investment Capital
Supermax Corporation Berhad is a leading international manufacturer, distributor and marketer of high quality medical gloves. Today, the Supermax Group has eleven factories manufacturing various types of natural rubber and nitrile latex gloves, which are exported to over 160 countries around the world, such as the United States of America, European Union, Middle East, Asia and South Pacific countries. By now , Supermax is currently producing 23.4 billion pieces of gloves per annum and the Group has identified for capacity growth to 25.8 billion pieces within next 18 to 24 months.
In the early 2014 , the group has gradually expanding an advanced manufacturing facility in Malaysia in 2014 for the production of disposable soft contact lens, semi-finished and finished Lens products. They created a new business unit SuperVision Optimax Sdn Bhd (SVO) with its very own brand, AVEO / AveoVision which is now spreading its markets globally. As at March 2016, the Group has invested with a capital commitment of RM100 million into the high-end, advanced robotic manufacturing of contact lens. To date, their contact lens are exported to Europe, North America, Latin America, Middle-East, West Africa, South Korea , South Asia , Eastern Europe and Asia-Pacific Countries. Already, there is a manufacturing plant located in Sungai Buloh produces 70 million lens a year at present.
In 4Q2016, Supermax has entered into Japan & incorporated a 70/30 JV company, Aime Supermax KK based in ShinYokohama, Japan which is the second largest consuming market of disposable contact lens after the United States. Going forward, they would be looking into acquiring companies in Japan which are already securing substantial market shares in the EyeCare, LensCare & the Beauty Industry.
Besides,they have start up an e-commerce platform through online shopping in US catering to American consumers.
Due to the latest QR Report
1. The Group had managed to fully commission its newest plants, Plants #10 & #11, which have gradually added 5.6 billion pieces of gloves to the Group‟s total installed capacity.
2. Commercial production at the rebuilt plant of Block G, Taiping plant has commenced on 18 July 2018. The plant is expected to be fully operational by end-September 2018 with annual production capacity of 1.35 billion gloves.
3. The Group had also expanded its land bank for purposes of capacity expansion by acquiring a piece of land behind its existing cluster of plants in Meru, Klang. Construction works to build its 12th plant on this plot of land have already started in June 2018 and will further add to the Group‟s production capacity by 2.2 billion pieces when completed in the 2nd half of 2019.
4. For the contact lens division , Japanese medical device authority and had in June 2018 successfully obtained the product license to export contact lenses to Japan, the second largest contact lens market in the world. The first batch of contact lenses were recently shipped to Japan on 25 August 2018.
5. The sharp drop of profit margin is due to a higher raw material cost .
### Future Prospect :
The group has completed the 2 latest plant and gradually investing a lot more to revive its older plants to extract higher production output.
By totaling up all the CapEX which has been done by the group , it is expected to produce an additional of 10 billion piece of gloves by the year 2020.
For the contact lens division , more contact lens will be exported to Japan for the next few quarter and it is expected to show its profit soon .
A high demand of disposable gloves remains vibrant for both the natural rubber and nitrile variants will continue to augur well for the Company and the industry as a whole.
High USD / MYR rates will surely benefit them as a export company .
The share price has been extremely volatile since it climbed up to RM 4. 50 ++ and posted a weak result which resulted in a huge drop to RM 3.09 . It has fall approximately 30 % for the last 7 trading days . Is this a great chance ? Will it back to the top ? Or it is just the starting point ?
1) Intrinsic Value Analysis :
Based on our intrinsic value calculation analysis ( assumption of 15 percent LTG ) , Supermax Corp is currently overvalued ( 30 percent higher than fair value ) , the calculated fair value is RM 2.30 as shown above .
2) How we calculate our est growth rate ?
Based on its CAPEX , and its segment sentiment .
3) PEG RATIO
Based on anticipated growth of 15 percent a year , its PEG RATIO is shown below :
PEG ratio = Current Rolling 4 Quarter PE/ Est Growth Rate
= 20/15
=1.33 (slightly overvalue)
4) Chart Pattern Analysis
i) From The Price Action Chart , this counter is bearish in medium term , we see it as a healthy correction / retracement , however a rebound is imminent and will be occurring in this month , however , in my opinion , the price to enter will be at 2.4-2.65 . We still remain our stand that this segment is still bullish amid US Dollar Strengthen . Besides , this counter started its contact lens business in japan , it will be a catalyst to boost this counter in the long run . With higher CAPEX these few years , we believe that it will become the new star in stock market .
ii) From the Volume Movement Chart , the accu / dis indicator stated that tons of retailers have lost their confident amid vast drop from its peak , however the OBV indicator action is not proportional to the accu/dis indicator , it shows a divergence with it , it means the big market player are still in , only the herd are out .
5 ) Forecast PE :
Average EPS for each quarter in financial year 2019 = RM 0. 05
With a PE of 20 - 25 for Supermx Berhad = RM 0. 05 x 4 x 22
= RM 4. 40
Disclaimer : Information above is for sharing and education purposes , not a buy and sell advice , please refer to ur advisory for any buy or sell call , buy and sell at your own risk .
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