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CGS-CIMB reiterates 'add' call, target price for Supermax
2 minutes

KUALA LUMPUR (Nov 3): CGS-CIMB Research has reiterated its "add" call on Supermax Corp Bhd, as the company expects global glove demand to stay robust for at least the next 12 months while average selling prices (ASPs) remain on a positive uptrend.

The glove maker is receiving more large volume orders, especially from government agencies, as well as higher demand from non-medical markets, such as the food and beverage and airline, in tandem with higher healthcare awareness due to Covid-19, the research house said in a note today.

"We expect nitrile butadiene (NBR) prices to continue on the uptrend (estimated 50%-60% rise year-to-date) due to insufficient market supply.

"Yet, Supermax does not expect any impact on its profitability as ASP hikes will be more than sufficient to offset the higher NBR costs," it said.

In the upcoming quarters, Supermax expects sales of natural rubber (NR) gloves to increase, as more customers are willing to switch to NR gloves due to cheaper pricing (30%-40% discount to NBR gloves) and shorter lead time.

"Hence, we keep our 'add' call with a target price of RM13.20, as we expect ASPs to peak in 2021 forecast.

"Nevertheless, we continue to like Supermax for its stronger earnings prospects on solid global glove demand, and proven own brand manufacturing business model, which garners better margins versus its peers," it added.

For the financial year ended June 30, 2020, Supermax recorded its best-ever annual financial performance with record-high sales revenue of RM2.13 billion and profit before tax of RM680.2 million.

At lunch break, Supermax's share price increased eight sen or 0.9% to RM8.99.

http://www.theedgemarkets.com/article/cgscimb-reiterates-add-call-target-price-supermax

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