Rubber Gloves: SGX listed rubber glove manufacturers, namely Riverstone and UG Healthcare are trading at their all-time highs, probably inspired by Malaysian listed peer Top Glove’s (world’s largest rubber glove manufacturer) strong 4QFY8/15 results which beat estimates.
Key takeaways from Top Golve’s results: sales volume was higher (+7% q/q, +15% y/y), led by its nitrile sales (+15% q/q, +53% y/y) to the US, Europe and Japan; and (ii) EBITDA margin expanded substantially (+4.4ppt q/q, +10.4ppt y/y) on both internal (e.g. higher productivity) and external factors (e.g. higher USD/MYR and lower raw material prices).
Following the strong set of results, a final DPS of 12sen/ share was declared, bringing total FY8/15 DPS to 20sen/share (+25%). Separately, Top Glove also proposed a 1-for-1 bonus issue and a employees share grant (up to 15% of paid-up capital).
Going forward, Maybank-KE expects the stock to continue outperforming in the next 3-6 months given its positive earnings outlook and proposed bonus issue which will improve trading liquidity.
Meanwhile, other rubber glove manufacturers are also expected to perform well on strong near-term earnings growth, underpinned by new capacities and higher margins due to improved efficiencies.
Maybank-KE have Buy ratings on Riverstone (TP: $1.92) and UG Healthcare: (TP: $0.41).
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