Wednesday, July 22, 2015

Rubber gloves

Rubber gloves: Sector re-rating to stretch longer
According to Maybank-KE, the rubber gloves sector is likely to continue its upward re-rating as price competition eases and new capacity is well absorbed by growing demand.

The universe of six rubber gloves manufacturers listed in Malaysia and Singapore surged 43% year-to-date versus KLCI's -0.4% decline and STI's 1.5% gain.

This came on the back of rising global demand that has since outpaced the current available supply, even at maximum capacity, driven by improvement in healthcare awareness and more stringent industry regulations following the recent outbreak of diseases like H1NI influenza and MERS.

As a bonus, the sector will continue to benefit from the strengthening USD.

The house believes that rubber glove manufacturers are expected to perform well on strong near-term earnings growth, underpinned by new capacities and higher margins due to improved efficiencies.

In Singapore, the two rubber gloves manufacturers are Riverstone (Buy, TP $2.05) and UG Healthcare (non-rated).

UG Healthcare sits on Market Insight's Growth portfolio. The company is an established glove maker and may also enjoy a potential re-rating as it plays catch-up with its larger rivals, with 50% capacity expansion coming on stream in the next few months.

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