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Supermax: my revised target price


Koon Yew Yin 1 July 2020

Yesterday I attended Comfort AGM during which the Chairman openly said that due to the Covid 19 pandemic, the demand for gloves far exceeds supply. As a result, the company can easily increase their selling price for their products. They are now increasing their selling price by 5-10% every month. They sell   cheaper to long term customers and at higher prices to non-regular customers.

Based on the new information, I need to revise my target price for Suparmax. Since Supermax has its own sale outlets in USA and many other countries, it is safe to assume it can increase its selling price by 15% every month.     

I refer to the above report, total issued shares is 1,300 million. 

1st quarter revenue Rm 447 million, PAT or net profit 71 million.  

For the next 9 months, each month PAT will be 15% Rm 447 million = Rm 67 million X 9 months = Rm 603 million.

Total for the whole year Rm 675 million 

EPS 675 divided 1300 shares = 52 sen   

Based on P/E 20 target price Rm 10.4 

Based on P/E 25 target price Rm 13.00 

Since the company has its own sale outlets in US and other countries, it can easily increase its selling price for gloves. Any price increase is pure profit because the company does not need additional cost to increase the selling prices.  

Due to the Covid 19 pandemic, Supermax deserved to sell at P/E 25.  

Useful information:

The World Health Organisation has just reported 150,000 new Covid 19 cases, the biggest number of Covid 19 cases in one single day. US has 2.356 million cases and 122,200 deaths and Brazil has 1.089 million  cases and 50,600 deaths. Based on the continuous increase of cases in almost all the countries in the world, the pandemic is still spreading quietly rapidly. Even though vaccine is under human testing, FDA still need time to examine to approve the safe use of the vaccine. Many scientists predicted the pandemic will not be under control for at least another year. 

It looks like the demand for gloves will continue to exceed supply for a long time. As a result, glove price will continue to increase and all the glove manufacturers are making more and more profit which should be reflected on their share prices.    

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