-->

Type something and hit enter

Pages

Singapore Investment


On

 

Outlook of glove makers seen unaffected near term
3-4 minutes

PETALING JAYA: The updates on the Covid-19 vaccine development are not expected to affect the prospects of glove makers in the near term.

An analyst noted that forecasts for glove companies remained unchanged and estimated that local glove makers generally have orders secured up until the end of 2021.

According to UOB Kay Hian, Supermax Corp Bhd’s capacity has been sold up until end-2021 and the group is receiving deposits at 30% to 50% of contracted orders.

Meanwhile, Kossan Rubber Industries Bhd’s capacity has been fully taken up until the end of 2021 while still receiving orders for 2022.

Kossan Rubber Industries Bhd’s capacity has been fully taken up until the end of 2021 while still receiving orders for 2022.Kossan Rubber Industries Bhd’s capacity has been fully taken up until the end of 2021 while still receiving orders for 2022.

UOB Kay Hian said that the Covid-19 vaccine candidate’s achievement of 90% efficacy was within expectations, noting that an additional 12 to 18 months were required to achieve global herd immunity.

“To reiterate, it (vaccine update) does not fundamentally affect glove demand over 2021 as we believe supply is still in severe shortage with usage rate exceeding the glove production rate.

“Furthermore, it would take an additional six to nine months to fully restock the entire supply chain.

“Based on previous recent sell-downs, there could be a 20% to 30% knee-jerk selling, which could be a meaningful entry, given that the prospects are intact, ” said UOB Kay Hian in a recent report on Supermax.

The research house added that the gradual ramp-up in the global manufacturing of Covid-19 vaccine would mean that the average selling prices (ASPs) of gloves are unlikely to fall sharply immediately.

UOB Kay Hian has raised its financial year 2021 to 2022 net profit forecasts for Supermax Corp Bhd by 216% and 505%, respectively, in line with updated ASPs, output and cost assumptions.

It said key risks to the earnings revision include the strengthening of the Ringgit against the US dollar and a potential windfall tax.

“In the recently tabled Budget 2021 on Nov 6, it was announced that the Big Four glove producers have committed to donate a cumulative RM400mil to help ease the government’s burden for vaccine and health equipment expenses.

“We are positive over the development as this rests rumours of a potential windfall tax, ” said UOB Kay Hian.

Apart from that, the research house opined that the additional supply from new entrants to the glove manufacturing industry is not a concern at present.

For one, new entrants will likely struggle to secure already-tight nitrile butadiene rubber (NBR) supply - an issue plaguing glove producers.

“Furthermore, it may take up to 1½ years to complete the glove manufacturing facilities.

“By 2022, supply from new entrants which is estimated at a blue-sky capacity of 29.4 billion pieces annually represents 6% of global glove demand of 485 billion pieces, ” it said.


https://www.thestar.com.my/business/business-news/2020/11/11/outlook-of-glove-makers-seen-unaffected-near-term

Back to Top