Glove stocks cannot drop continuously for whatever reason

Koon Yew Yin 23 Feb 2021

No stock can drop continuously for whatever reason. After some time, they will rebound. All the glove stocks have been dropping in the last 5 months. They should rebound sooner or later. 

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Due to Covid 19 pandemic, the demand for gloves has been surging since the pandemic began about 15 months ago. All the glove makers can easily increase their selling prices to make more and more money. All of them have reported increased profit in the last few quarters. 

Many scientists have predicted the pandemic will not be completely under control for another 4 or 5 years despite massive vaccination. At least 70% of all the people in the world must be vaccinated to stop the spread on the coronavirus. Currently only the rich nations can afford to buy vaccine to vaccinate all their citizens. Unfortunately, there are many more poor nations that cannot afford to buy the vaccine. 

As I said earlier, all the glove stocks have been dropping for no reason. It defies investment logic. 

For example: Supermax has the best profit growth rate among all the glove stocks. Its 1st quarter EPS 30.58 sen. Its 2nd quarter EPS 41.14, totalling 71.72 sen for 1st half year. Assuming the company cannot, its EPS for 3rd and 4th quarter will be 40.14 sen for each quarter. Its 2nd half year EPS will be 80.28. Its annual EPS will be Rm 1.52. Based on PE 10, it should be Rm 15.20 per share.

The chart below shows Supermax has started dropping from Rm 10.70 on 19 Oct to close at Rm 5.53. It has dropped 50% in last 4 months. It defies investment logic. 

The table above shows that in the last 5 months Kenanga has posted 5 buy recommendations with its target price, CIMB 4, Affin 2, BIMB 2 and MIDF 1. You can read each of their recommendation if you click Q box.  

To stop the glove stock from dropping, I would like to suggest the following:

1 All the Investment Banks which have posted buy recommendations should buy to prevent glove stocks from dropping further. They should buy glove stocks because they cannot find any stock sell at cheaper PE ratio. They should what they preach.  

2 Investors with buying power should buy glove stocks. 

3 Glove stockholders should stop selling. They cannot find any other stock selling at cheaper PE.  

4 Each of the Glove manufacturers should issue a press statement that they can easily increase their selling prices due to the surge in demand to make more profit. They have presold their gloves for 1 year. 

5 Bursa and Securities Commission must stop the short selling and manipulators. As the prices are  dropping they can sell and buy back later to make money.    

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