UG Healthcare

UG Healthcare: Counter is up 5.4% today, taking its three week return to ~23%, albeit on low volume.

The group was recently on The Edge magazine, where more light was shared on its plans going forward, following the announcement of its FY15 results.

With the group’s products mostly priced in USD and costs largely in ringgit, the group was widely expected to benefit from the depreciation of the ringgit, which has fallen drastically versus the USD over the past year. Yet, the group registered fair value loss on financial derivatives, as ~40% of its sales were hedged via forward contracts as at end-Jun. Going forward, management is guiding for these losses to be reduced.

Management aims to expand its global footprint, especially in the emerging markets, where the per capita glove consumption could be as low as 3% of developed markets. On that front, the group wants to have full control over its supply chain, which will enable it to customise products more effectively to client’s needs.

UG Healthcare intends to raise its annual production capacity to 1.9b pieces of gloves by end-FY16 from the current 1.5b, while also upgrading some of its existing production facilities, which will enable it to effectively meet more client demands. The group has a current utilisation rate of 80-85%.

At the current price, UG Healthcare trades at 17.6x FY15 P/E versus Riverstone’s 20.0x trailing P/E.

The stock continues to sit on Market Insight’s Growth portfolio.