VIP (ASX) Ann: Investor corporate presentation

Originally posted by MPPa: ↑

Hi guys! I brought in around 0.42c earlier in the year but I sold out at 0.38 a month ago after reading Top Glove in Malaysia qtrly report, and drawing the similarities I decided this business is too risky for me. (risk>potential)

I feel long term this company will come under pressure, most manufacturing company has been having challenging times due to marked increase in material and labour cost. You can see that ANSELL (ASX: ANN) share price been dropping due to market anticipation of decreased profit margin. For a leader in protection gear ANN predict a 1-2% growth for next FY. For a small company like VIP, it is possible to achieve better growth, but its small size also post a risk.

The lack of an independent director who stand up for us shareholder to limit the fat pay check and large amount of performance right to the management team has weighted on me to sell out as well.

Manufacturing Gloves by has a fairly low barrier of entry and profit margin will reduced even if it is very profitable in the short term as everyone will ramp up production to take advantage of the price. The lack of a MOAT will be the limiting factor for the growth of this company long term.

This might be a good dividend stock but I think the remarkable QoQ growth will not be like last year going forward due to increased competition, increased in cost of production (main one) and reduce overall demand as supply increases globally. Overall I feel most of the above concerns has been priced in hence the low PE of this company, however compare to its peer in Malaysia we are still paying a higher premium.

Thank you for reading as this is my first post in HC! I have been lurking around and feel that after reading the presentation, they mostly focus on how well it perform last year but very little information with how they will be going forward has prompted me to post my assessment on the current situation of the company.

I also want to apologise to anyone who might be offended by my assessment. I believe the biggest reason anyone holding a stock in a company is based on the assumption that the company future will be better than it is currently and share price will increase, so the Ax I posted will likely to be not in line with most on this sub. However I am still learning and would really appreciate other experienced investor can share their views and learn from your view too.

All in all I feel the current share price currently is pretty reasonable, for any investor who have a moderate to high risk tolerance this can be a speculative stock to hold as there is some potential big gains if they can penetrate the US and Aus market taking market share leading to remarkable growth going forward. As I listed above however there are also a few headwinds and the growth of a product without a MOAT is very difficult to predict. Thank you and remember- ALWAYS DYOR!

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Thanks for your thoughts MPPa. I agree with you in relation to VIP's lack of moat, being a price taker, and input pricing pressures. I think glove prices will probably normalise too in the next couple of years - VIP's own project timeline shows how quickly the industry can put in new production lines. Having said that, demand will probably remain strong with elevated health consciousness around the world and equilibrium price probably higher than pre-Covid, which would be great.

Some positives to consider: simple business model, favourable market dynamics, clear plan for growth, management with skin in the game (hopefully not taking too much from the cookie jar), and new markets opening up (FDA, TGA, own brand etc). If nitrile glove prices can hold up, I think VIP could perform really well.

Is the market pricing VIP fairly? Hard to say, but I struggle to think who the current buyers of this business are. It's not a sexy industry, not a local ASX business, not big enough for institutions, and not covered by (m)any brokers. The only thing to attract retail investors would be glorious fountains of cash, and we'll have to wait and see if it delivers.

DYOR