Rubber glove stocks have experienced a sharp downturn early this year and thus performed poorly YTD. The cause of concerns were due to oversupply vs falling demand and higher operating cost (power tariff and gas hike). The recent hike of Ringgit versus the US dollar further exacerbate the negative sentiments within the glove industry as this may impact the firm's export-based income.
With all the negative elements priced in, I believe this presents a buying opportunity for glove related counters particularly, Supermax Corporation.
I particularly favor SUCB due to:
- Low P/E of 12x as compared to KOSSAN, TOPGLOV and HARTA.
- Alor Gajah plant has resumed operation after the fire incident. This should address the temporary loss of production output. We should be expecting a better result on the upcoming quarter report.
- Technical rebound due to oversold region in RSI.
Supermax Corporation Sdn. Bhd. (Stock Code: 7106)
Short-term TP: RM 2.20
Long-term TP: RM 2.60
- Benjamin
Disclaimer: Stock recommendations and comments presented on www.benjamin-lim.com are solely based on personal opinions. They do not represent the professional advice on whether to buy, sell or hold shares of a particular stock. All investors are advised to conduct their own independent research into individual stocks before making a purchase decision. In addition, investors are advised that past stock performance is no guarantee of future price appreciation.
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