Koon Yew Yin 17 May 2020
My old trusted friend Mr Ooi Teik Bee and I had a long discussion about share investing during the Covid 19 pandemic which is affecting almost all the listed companies. We also noticed that the daily traded volumes for Comfort, Supermax, Kossan, Top Glove etc are much larger than before the Covid 19 pandemic. The reason is that all the institutional investors have to sell to cut loss on most of their holdings which they bought before the pandemic to buy glove manufacturers’ shares.
Due to Covid 19 pandemic the demand for gloves far exceeds supply. As a result, the price for gloves continues to go higher and all glove manufacturers will continue to make increasingly more profit which is being reflected on their share prices.
Covid 19 pandemic is affecting the profit of most listed companies with the exception of companies making products for the prevention of the virus infection. Based on this situation, I bought Comfort and Supermax shares recently. Fortunately, the share prices for both have been going up quite rapidly.
Compare annual production of each company with its market capitalization:
Comfort: The last traded price for Comfort is Rm 2.31 and it has 580 million issued shares. Its market capitalization is Rm 1,340 million and its annual production is 5.40 billion gloves. 5.40 billion gloves divided by Rm 1,340 million = 4 sen per glove.
Supermax: The last traded price for Supermax is Rm 3.97 and it has 1,300 million issued shares. Its market capitalization is Rm 5,161 million and its annual production is 27 billion gloves. 27 billion gloves divided by Rm 5,161 million = 5.23 sen per glove.
Compare historical P/E ratio for Comfort:
The above chart shows Comfort’s earning for each quarter for the last 4 quarters below, totalling 5.84 EPS. Current price divided by EPS is Rm 2.31 divided 5.84 = 39.5 P/E.
Compare historical P/E ratio for Supermax:
The above chart shows Supermax’s earning for each quarter for the last 4 quarters totalling 6.84 EPS. Current price divided by EPS is Rm 3.97 divided 6.84 = 58 P/E.
Basing on production cost for 1 glove with market capitalization, Comfort is cheaper.
Basing on historical P/E ratio, Comfort is also cheaper.
A few day ago, Comfort shot up 30% to limit high with about 100 million shares traded. The average volume traded daily is about 70 million in the last few weeks. Only institutional investors have so much money to buy such big volume.
Nevertheless, Investor should consider Supermax’s advantages. Supermax is a larger company with its own brand and its own marketing organisation to sell its product, it should be able to sell its products at relatively higher prices with better margin of profit.
Currently my investment is 70% on Comfort and 30% on Supermax. I am not sure which has the better profit growth prospect in future.