Monday, October 19, 2015

Rubber Gloves

Rubber Gloves: Riverstone and UG Healthcare making new all time highs this morning. See our posting last Fri below:
SGX listed rubber glove manufacturers, namely Riverstone and UG Healthcare are trading at their all-time highs, probably spurred by the strong earnings reported by Malaysian-listed Top Glove, the world’s largest rubber glove maker.

Key takeaways from Top Glove’s 4QFY15 results are 1) sales volume grew 15% y/y and 7% q/q, led by its nitrile sales (+53% y/y, +15% q/q) to the US, Europe and Japan; 2) EBITDA margin widened to 22.5% (+10.4ppt y/y, +4.4ppt q/q) on both internal (higher productivity) and external (higher USD/MYR and lower raw material prices) factors.

In view of the sterling performance, the group declared a final DPS of 12sen was declared, bringing total FY8/15 payout to 20sen (+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 bonus issue which will improve trading liquidity.

Meanwhile, other rubber glove manufacturers are also expected to follow suit on strong near-term earnings growth, underpinned by new capacities and higher margins due to improved efficiencies.

Maybank-KE have Buy ratings on both Riverstone (TP: $1.92) and UG Healthcare: (TP: $0.41).

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