Glove makers: 1H6/16 earnings of UG Healthcare beat Maybank-KE's expectations, at 48% of FY16E. Headline earnings grew 34% YoY, driven by capacity expansion, strong USD and low material prices. 2H6/16 will be stronger as its new capacity of 0.4b gloves from phase 2 expansion will make a full contribution, vs 2 months contribution in 1H6/16.
As for Riverstone, which is scheduled to release its results on 24 Feb, Maybank-KE expects to be within expectations. Core earnings growth for 4Q15 and FY15 should be more than 60%, driven similarly by capacity expansion, strong USD and low material prices.
House remains positive on the industry, given the continuous expansions and favourable trends in currency and material prices. Maintain BUY on UG and Riverstone. Maybank-KE raised UG’s TP to SGD0.52 from SGD0.41 after rolling over its base year to FY6/17, still based on 14x, 40% discount to peer average.
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