Comfort: how to play the game?

Koon Yew Yin 11 June 2020 

As shown on the price chart below, Comfort share price shot up from 80 sen to peak at Rm 4.20 on 1 June. It has gone up 400% within 6 weeks. Since then it has been fluctuating like a yoyo. Smart players would have sold and hoping for the price to drop quickly so that they can buy back at cheaper prices. 

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The question is “is the game over?” 

Many commentators expressed their concern of the controlling shareholder selling some of their holdings as shown on the latest announcement below. He still has a total of 106,225,000 shares after selling 600,000 shares. You must remember that he has waited more than 20 years since the formation of the company, to sell a small amount to enjoy life, probably to buy a few houses and cars for his children. 

Date of Notice09-Jun-2020

Total no of securities after change

Direct (units)22,225,000
Direct (%)3.81
Indirect (units)84,000,000
Indirect (%)14.41
Total (units)106,225,000
Total (%)18.22

Due to Covid 19 pandemic the demand for gloves far exceeds supply. As a result, the price for gloves continues to go up higher and higher which is being reflected on their share prices. That is why all the glove stocks have been shooting up like rockets. Unfortunately, practically no investment bankers promote Comfort because it is relatively a small company. 

Maybank promoted Top Glove with a target price of Rm 25. As I said “rising tide lifts all boats”. When the price for Top Glove goes up, it will lift up all other glove stocks including Comfort. 

Mr Ooi Teik Bee’s buy recommendation

On 27 May 2020, I posted my article namely “Comfort: what should you do?” in which MR Ooi gave me permission to excerpt part of his buy recommendation for Comfort. His target price for Comfort was RM 5.56 based on P/E 7.38. Later Mr Ooi raised his target price to Rm 8.++. It has been dropping in the last few days and it is now trading around Rm 3.10. The downside risk is minimum. 

When will the demand for glove be reduced? Or when the game is over?

Until Covid 19 pandemic is under control the demand for gloves will continue to exceed supply and all glove manufacturers including Comfort will benefit. Many studies have shown that the pandemic will continue for at least another 1 year. Currently US has 2.02 million Covid 19 cases and 114,000 deaths. US has the most Covid 19 cases in the world and the number of cases is still rising. Based on this fact, the demand for gloves will continue to exceeds supply. 

The game is not over yet.

SARS (Severe Acute Respiratory Syndrome)

In fact, the demand for gloves will continue even after the pandemic is under control as demonstrated during the SARS outbreak about 10 years ago. The users of gloves appreciated the importance of using gloves and they continue to use gloves. 

Based on the above facts, Comfort share price should continue to go up higher and higher.   

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