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KUALA LUMPUR: Glove makers ‘shares fell in trading Monday morning following a downgrade from a foreign research house that expects glove makers’ prices to weaken next year as stocks are released. vaccines for Covid-19 and other competitors increase production.
Hartalega
It lost 4.52%, or 62 sen to RM13.10, Top Glove is down 4.78%, or 33 sen to RM6.55, Supermax is down 4.37%, or 33 sen to RM4.23 and Kossan is down 6.31%, or 34 sen to RM5. 05.
Comfort Gloves fell 4.53%, or 16 sen to RM3.37 while Careplus Group they lost 5.45%, or 14 sen at RM2.43.
The US Food and Drug Administration authorized the vaccine from Pfizer and its German partner BioNTech SE on Friday.
Meanwhile, JP Morgan Asia Pacific Equity Research said that as the world approaches the availability of the Covid-19 vaccine, it expects glove prices to weaken in 2H21.
“Short-term concerns about rising costs, plus the risk of long-term overcapacity, represent downside risks.
“We started the coverage of Top Glove (RM3.50), Hartalega (PT RM8.50) and Kossan Rubber (PT RM3.80) with underweight ratings, ”he said.
As for Top Glove, the world’s largest rubber glove maker, JP Morgan said aggressive testing for Covid-19 in developed countries has accelerated the demand for gloves, leading to supply shortages.
However, with testing beginning to peak and more capacity on board, we expect demand to slow down, thus alleviating short-term supply shortages.
“Therefore, we expect glove prices to peak in the first half of 2000 and begin to normalize thereafter. As a result, post-Covid-19 earnings and fair value will also normalize. As of 4TFY20, Top Glove’s cash balance is equivalent to 45% of shareholders’ equity.
“Despite the strong cash flow generation, the dividend payment remains at 50% but it plans to increase its capital spending four times its historical average,” he said.
JP Morgan explained that it has a December 2021 PT of RM3.50 with an underweight rating.
“Our target price is based on 18 times the P / E of EPS for fiscal year 22E. We refer to the 2015-2019 period to derive our glove sector average target P / E of 18x, as Malaysian glove producers experienced volume-driven earnings growth during that period, similar to growth drivers. post-Covid-19, ”he said.
At the local level, Prime Minister Tan Sri Muhyiddin Yassin said the government planned to increase its purchase of the Covid-19 vaccine to meet the immunization needs of around 60% -70% of Malaysians compared to 30% today.
He said this was because some nations had already purchased doses of the vaccine that were higher than their population.
In late November, Muhyiddin said that the government had begun implementing an RM3bil plan to obtain enough Covid-19 vaccines to immunize 6.4 million people in Malaysia as soon as the vaccine has been shown to be safe enough to be used. .
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