PETALING JAYA: Rubber glove stocks riding high on the prospects of sustainable growth in demand, posted the best gains on Bursa Malaysia yesterday.
Supermax Corp Bhd tops the gainers list to close 65 sen higher at RM5.35.
Nitrile glove maker Hartalega Holdings Bhd rose 51 sen to RM6.72, Rubberex Corp (M) Bhd firmed 43 sen to RM2.75 while Kossan Rubber Industries Bhd and Adventa Bhd were each 35 sen higher at RM5.84 and RM3.48 respectively.
CIMB Research yesterday released an optimistic report indicating that the rubber gloves sector was in a good shape after experiencing a spectacular year in 2009.
The brokerage is maintaining an overweight stance with factors that could extend a re-rating including continued uptake in demand from the healthcare industry, ongoing capacity expansion and above-market earnings growth driven by major expansions by many local gloves companies.
CIMB Research said that over the next two years, industry giants like Top Glove Corp Bhd, Supermax and Latexx Partners Bhd would be adding annual capacity of 3 billion to 7 billion pieces to capture a bigger slice of the expanding world market.
“We believe demand will be resilient (this year) and continue to grow given the hygiene awareness, health regulations and population size,” it said.
In 2009, customers’ order returned to normal with latex prices coming down from record levels, the strengthening of the US dollar and the outbreak of the H1N1 pandemic in the second quarter leading to a rubber glove shortage which many manufacturers believe would continue into 2010.
Supermax group managing director Datuk Seri Stanley Thai told StarBizthat he was bullish about the sector’s performance for the next six months.
“I expect it to remain in an oversold position (higher demand and lower supply situation).” he added.
He said it was timely for both local and foreign funds to consider the glove sector in their equity portfolios for 2010 given its resilient status.
“2009 was a really good year for local rubber glove players. It was unlike in 2008, especially between June and September, when players faced the toughest challenge when crude oil prices hit a record US$140 per barrel on the back of the Government’s unexpected announcement on the electricity, natural gas and gasoline price hikes,” added Thai.
He said the sudden increase in the utility costs had disrupted most rubber gloves players’ cost structure and suffers margin squeeze as many had sold their production capacity two months ahead.
Utility cost represents about 50% of the glove makers’ total cost of production.
“We (players) are used to the volatility in raw material prices and foreign exchange because that is the nature of our business. However, we fear sudden changes in the Government policy especially on the utility costs and subsidies,” he added.
Kossan Group corporate affairs senior manager Edward Yip said the H1N1 pandemic that gripped the world last year had helped restore the industry to a stronger position.
“Both the developed and even developing nations are imposing more stringent rules on healthcare. Rubber glove makers are definitely riding on this trend with the prospect looking good over the next one to two years,” he said.
He noted that most glove manufacturers practised an efficient costing and pricing mechanism, using the average latex price for the previous month to set the current month’s selling price.
Thus, they can pass on the higher latex cost to customers.
Local rubber glove makers contributed about 65% of the total world rubber gloves demand estimated at 145 billion pieces per year.
(Source: biz.thestar.com.my)
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