Sunday, September 29, 2013

Rubber Gloves: Still Riding On Nitrile (MKE)

Rubber Gloves
Still Riding On Nitrile

 Downgrade to NEUTRAL. PER valuations of glove stocks have re-rated significantly from 8-16x (end-2012) to 11-19x presently amid a positive operating environment and superior financials (high ROEs, zero/low gearing). Valuations are fairly reflective of fundamentals at this stage and thus we are downgrading the sector to NEUTRAL from Overweight. Kossan remains our top pick with a higher TP of MYR7.60 (+7%) as we attached a higher PER target of 16x (from 15x), still lower than its peer average of 15.6x. Our HOLD on Hartalega (TP MYR6.71) is maintained but we have downgraded Top Glove to HOLD (from BUY) with a slightly lower TP of MYR6.40 (-5%).


Mild nitrile price competition. Though new supply looks aggressive, near-term price competition is likely to be mild, for new capacity will just about match demand, we believe, with the latter expanding by about 20% YoY. In addition to organic demand growth, nitrile glove sales are also driven by a shift in customer preference from latex powder-free to nitrile gloves. Nitrile glove margins remain superior to those of latex gloves, by >6ppts, due to higher pricing and lower raw material cost.

Hedged against currency volatility. To hedge their USD-denominated receivables against USD:MYR volatility, most glove companies buy forward contracts (which expire in 2-3 months) to sell USD when glove deliveries take place. Hence, glove companies usually do not gain nor lose significantly on USD:MYR volatility.

Muted impact from fuel price hike. We understand that the recent fuel price hike (diesel: +11%) has led to higher transportation costs (+15%) for the glove companies. However, the impact is insignificant as transportation only accounts for 2-3% of total costs, and glove players are not adjusting their ASPs for this.

Hartalega, Top Glove: Less upside. We believe Hartalega’s near-term growth will be limited by its capacity constraint (new capacity to commence in 2015). Meanwhile, Top Glove’s sales volume could be flattish in sequential quarters as we think the higher sales of its nitrile gloves (est. 20% of total sales volume) could be offset by lower sales of latex powder-free gloves (estimated at 20% of total sales volume). We trim our FY8/13-14 EPS forecasts for Top Glove by 5% as we factor in weaker latex powder-free glove sales.

Kossan: A slightly better value proposition. Kossan, an increasingly nitrile-centric glove manufacturer, offers higher net profit growth (3-year CAGR of 16% on capacity expansion of 14% p.a.) at a lower forward PER valuation of 13.9x (vs 15.6x for its peers).



Source/Extract/Excerpts/来源/转贴/摘录: MKE-Research,
Publish date: 24/09/13

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Warren E. Buffett(沃伦•巴菲特)
Be fearful when others are greedy, and be greedy when others are fearful
别人贪婪时我恐惧, 别人恐惧时我贪婪
投资只需学好两门课: 一,是如何给企业估值,二,是如何看待股市波动
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“错过时机”胜于“搞错对象”:不会全军覆没!”
做自己熟悉的事,等到发现大好机会才投钱下去

乔治·索罗斯(George Soros)

“犯错误并没有什么好羞耻的,只有知错不改才是耻辱。”

如果操作过量,即使对市场判断正确,仍会一败涂地。

李驰(中国巴菲特)
高估期间, 卖对, 不卖也对, 买是错的。
低估期间, 买对, 不买也是对, 卖是错的。

Tan Teng Boo


There’s no such thing as defensive stocks.Every stock can be defensive depending on what price you pay for it and what value you get,
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“买股票就是买公司的股份,买股份就是与陌生人合股做生意”。
合股做生意,则公司股份的业绩高于一切,而股票的价值决定于盈利。
价值是本,价格是末,故公司比股市重要百倍。
曹仁超-香港股神/港股明灯
1.有智慧,不如趁势
2.止损不止盈
成功者所以成功,是因为不怕失败!失败者所以失败,是失败后不再尝试!
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每逢灾难就是机会,而是在灾难发生时贱价买股票,然后放在一边,耐性地等灾难结束
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