THE BIG-4 GLOVES - YOU WONT GET CHEAP ONCE YOU LETS IT GO NOW!
Author:sparta | Publish date: Fri, 22 May 2020, 1:25 AM
As we know, we expect the world’s demand for natural and synthetic rubber medical gloves to be about 345 billion pieces this year while it was only 298 billion in 2019. Malaysia is looking to export about 65% or about 225 billion pieces or more depending on the spread and duration of Covid-19.
We believe Malaysian glove producers have been the global preferred suppliers because they have the capacity to meet the increased supply-demand. So, going forward, they should be able to perform better. The local glove producers could see improved margins early this year, driven by increased production.
So I think they could sustain the margin, in fact, they might see an expansion going forward. When they ramp up their utilisation rate and capacity, technically the cost will be lowered. We would think it is possible to expand margin.
THE CONCLUSION
- I had maintained the bullish on Gloves till end-of Y20. After looking and reading all
their report card this Quater. There is nothing wrong bad results. Plus you should keep
invest and wait till next coming quater.
- Next quater all I forsees is good & superb results. So stay tuned, you wont regret to follow Kim's Stockwatch!
WHY GLOVES SECTOR IS THE BEST?
1. Global demand - Rubber gloves sector to see upsides from surging world demand.
- We maintained overweight on the rubber gloves sector with expectations of surging demand from the US due to the trade-war effect. Since Sept 1, a 15% tariff has been imposed on Chinese-made medical and vinyl gloves, which should increase their pricing versus local rubber gloves.
- We also expects the positive impact to be felt from the final quarter of the year as US gloves demand switches to local glove players, where the US accounts for 28% to 55% of glove players' group sales.
2. Glove Shortage - From oversupply to shortage due to pandemic and MCO
- It was only last year when there were repeated concerns of an oversupply in the rubber glove industry that hogged the headlines. But the situation has completely changed today in just a span of just a few months into the year 2020 with talk of an oversupply in the rubber glove industry being firmly a thing of the past.
- The Covid-19 outbreak which is now categorised as a global pandemic has upended everything and there are now concerns of undersupply in the rubber glove industry at this very crucial time.
3. Exchange Rate USD/MYR For Export. ( Ringgit Loser)
- Export-based companies: Glove makers such as Top Glove Corp Bhd and Supermax Corp Bhd - who rake in US dollar-denominated revenues, will likely see an erosion in margins this year due to the stronger ringgit, unless they can pass on the additional costs to consumers.
4. Low Crude Oil Prices
- Rubber glove shares wil rise when oil prices fall actually. Rubber glove also on attention while oil prices crashing. Rubber will get cheaper to make as the price of crude oil drops. Production costs will be low.
5. No vaccine for COVID-19 yet.
- According to WHO. Vaccine for new coronavirus 'COVID-19' could be ready in 18
months. The first vaccine targeting China’s coronavirus could be available in 18
months, so we have to do everything today using available weapons. Told by WHO.
| Publish date: Fri, 22 May 2020, 1:25 AM
(20min delay)