In understanding the past we may predict the future with higher level of accuracy. The discovery of COVID-19 vaccine is imminent. This fact obviously worries alot of glove stock investors as the sell down continues since the announcement of Pfizer's mRNA based vaccine a week back.
In this article, I present and compare the past performance of share price and QR of Topglov, Harta, Supermx & Kossan (btw all of this information is actually public info) .
1. We can see that prices of BIG 4 started to move up even before WHO declare H1N1 as pandemic. I guess this was where the smart money started to flow in.
2. For TOPGLOV, HARTA & SUPERMX, its share price move north aggrresively when WHO eventually declare world-wide pandemic on 11th June-09.
3. Now this is the part that is interesting, on 15th Sep 2009, FDA approved 4 vaccines (and finally the 5th one was on 16 Nov). At this point onwards, the share price of ALL 4 of them rallied more aggresive compare to the time there was no vaccine. The moving up lasted between 8 to 10 months with some correction in between.
4. Fundamentally, if you see the QR reported during the pandemic window, it DOES NOT reflect as strong PAT /margin as what they do now:
a) From at least TOPGLOV & SUPERMX QR notes, they did not indicate of foward selling. Today their inventories are oversold until end 2021.
b). During this period latex prices & crude oil (butaine) were higher than they were today. MYR was also stronger. Hence impact on PAT.
c). Today the glove produciton volume are at least double of where they were in 2009 e.g: Topglove only produce aprpox 30 bil pcs/year, now they are reaching 100 bil.
d). This is common knowledge that COVID-19 hits the world worst than H1N1. Therefore global demand have surged multiple times that of H1N1 era.
5. Eventually when enough masses had been innoculated and WHO declares the end of H1N1 pandemic, prices corrected itself. the QR which all BIG 4 release reflected the decrease in revenue (except HARTA which lasted a while longer).
So the question to ask yourself if you are investing in glove today or you are deciding to cut loss is this....why do you think the price move up north stronger after H1N1 vaccine is approved by FDA in Sep-09? Will history repeat itself? Does the discovery of vaccine or the anticipation that it will be available in Dec or Q1 2021 reduces the demand for glove? What does history teach us?