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In 1Q21, the glove makers such as Top Glove and Hartalega fell by 26.1% and 26.4%, respectively, Kossan Rubber plunged 28.4% while Supermax and Comfort Glove tumbled more than 36%. Meanwhile, Top Glove, Supermax and Hartalega also fell to their one-year low price of RM4.52, RM3.81 and RM8.91, respectively, to end 1Q21.

Despite the lackluster performance in the previous quarter, the rubber glove sector has seen making a comeback this month, showing that the glorious days may not be over just yet, due to the rising Covid19 cases in both Malaysia and globally. Investors who are bullish on Malaysia glove counters and want to gain leveraged exposure to these underlyings for a fraction of their share prices may consider Macquarie’s trending warrants such as ….

Rising in Covid-19 cases, blessing in disguise for glove makers
In 2Q21, rubber glove counters were among the top gainers in Malaysia; Supermax recorded the most gain since early April, up 45.4% based on yesterday’s closing price of RM5.54, followed by Comfort Glove (+43.8%), Top Glove (+20.6%) and Kossan Rubber (+20.6%). The recent rally in the glove counters could be due to the rising daily Covid19 cases which recorded more than 2,000 cases per day recently despite ongoing movement restrictions in most states in Malaysia, coupled with even stricter rules imposed by the Malaysian government amid the Malaysian Muslims’ anticipation to be able to go back to their hometown to celebrate Hari Raya with their families in couple of weeks’ time.

Gloves demand to stay above pre-Covid19 levels, said analyst
Earlier last month, an analyst from a local investment bank said that the plunge in share prices of Malaysian rubber gloves makers was “unjustified”. The analyst maintained an Overweight call on the sector as he believes that investors might have lost their confidence earlier due to the potential fall in selling prices of gloves on lower demand as more people are being vaccinated globally (CNBC, 9 March).

In the same news article, the analyst also mentioned that the jump in average selling prices of gloves is not sustainable and forecast of 30% to 35% fall in prices in 2022, while he expected that the gloves prices will likely remain above pre-pandemic levels for the next two to three years at least. This is partly due to the demand for gloves that is expected to remain elevated in the coming years as the medical sector uses more as their personal protective equipment.

Source: Macquarie Research - 22 Apr 2021


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