COMFORT (2127) COMFORT GLOVES BHD : my target price (revised) - Koon Yew Yin
After I read the following statement from Top Glove quote “Top Glove recently highlighted that 20 per cent of its new capacity would be allocated to spot price, between US$80 and US$100 for 1,000 pieces.” unquote. The price increase is more than double the normal price. That is why Top Glove’s profit is increasing so rapidly.
The increase of the selling does not cost the company anything. It is pure profit.
To be safe I assume Comfort can only increase its selling price gradually by 33.3% for each quarter of the next 3 quarters.
1st quarter sale Rm 152 million, profit Rm 16.34 million
2nd quarter sale increases 33.3% of Rm 152 = Rm 50.7 million; profit Rm 16,34 + Rm 50.7 = Rm 67 million
3rd quarter profit Rm 67 + Rm 50.7 million = Rm 117.7 million.
4th quarter profit Rm 117.7 + 50.7 million = Rm 168.4 million.
Total for the year profit Rm 369.4 million
Total issued shares 580 million
EPS 64 sen
Based on P/E 20 target price Rm 12.28
Based on P/E 15 target price Rm 9.60
Based on P/E 10 target price Rm 6.40
If I based on 100% selling price increase for the 2nd, 3rd and 4th quarter, Comfort’s profit would be more than what I assumed above.
Due to Covid 19 pandemic the demand for gloves far exceeds supply. As a result, the selling price for gloves is going up higher and higher. It is quite safe to assume the Comfort share price should sell at P/E 10.
Moreover, the pandemic is affecting almost all the listed companies. As a result, all the institutional investors have to sell to cut loss almost all their holdings to buy glove stocks so aggressively. That is why the daily traded volumes for clove stocks are much bigger than normal.
Note: I am obliged to inform you that Comfort is one of my major investment holdings. I am not asking you to buy to push up the share price to enrich me. If you do decide to buy, I am not responsible for your profit or loss.