Koon Yew Yin 20 April 2020
Due to the Covid 19 pandemic the demand for rubber and nitrile gloves far exceeds supply. As a result, glove price continues to go up higher and higher and all glove manufacturers will benefit.
As you can see, all the glove manufacturers’ share prices have been going up recently. Based on historical earnings, Hartalega is selling at P/E about 60, Top Gloves is selling P/E 44, Supermax is selling at P/E above 20. Rubberex and Comfort are selling below 20.
Rubberex has a much larger new plant which was scheduled to start operation in June, but it is being delayed by MCO.
Comfort:
Comfort’s annual account closes in January 2020. Comfort has six new lines commenced operation in Feb 2020. This, alongside the existing 49 production lines in the two plants in Simpang and Matang, Taiping, are running at close to full capacity, which collectively can produce between 430-450m pieces of gloves/month. The commencement of the new lines was timely as it helps to cater for both existing demand as well as the global surge in demand – arising from the unexpected outbreak of the COVID-19 pandemic. Beyond current expansion, more capacity may be added in the future, as the company had acquired about 39 acres of land in Perak in 2018 that can potentially house more capacity ahead. As demand for nitrile and specialty gloves increase, the potential capacity expansion can help to capture more market share moving forward.
As I said, the additional manufacturing capacity since February is timely to take advantage of the higher glove prices. Its 1st quarter result ending April 2020 should be much better than its previous quarters.
Among all the glove manufacturers, Comfort has the best profit growth prospect which is the most powerful catalyst to move share price.