1. OBM and Distribution Centres

First of all, OBM model  supermax has 8 distributor centres over the world as below:

1. USA - Supermax Healthcare Inc. (http://www.supermax.com.my/html/international_contacts.aspx)
2. BRASIL - Supermax Brasil Importadora
3. IRELAND - Supermax Healthcare (Europe) Limited
4. HONG KONG - Supermax Global (HK) Ltd.
5. UK - Supermax Healthcare Limited
6. SINGAPORE - Maxter Healthcare Pte Ltd
7. CANADA - Supermax Healthcare Canada Inc.
8. JAPAN - Aime Supermax KK

Let see the reported COVID-19 cases and death by country as table below:

Source: https://www.worldometers.info/coronavirus/ (updated 23 July 2020)

 Let see Supermax’s export data to US (updated to 2 Aug 2020)

Source: https://importkey.com/i/supermax-healthcare-inc (updated to 2 Aug 2020)

From the bar chart above, it can be observed that Supermax shipments to US from April-June 2020 has increased substantially compared to Jan-Mar 2020.

Let see how big the distribution centre of Supermax in Brazil from the youtube video below:

https://www.youtube.com/watch?v=Qwoj3LA9pOI&feature=emb_logo

I like this video very much due to it shows Supermax’s Brazil distribution centre is so established, where this video started with quality control of its own brand products and ended with its big warehouse and brand introduction. Brazil recorded second highest Covid-19 cases in the world and Supermax distribution centre in Brazil can sell their own brand of glove in Brazil with much higher margin compared to OEM or via dealers.

2. Demand Growth Data

Let see how big the growth of orders received by Supermax (Mar-May 2020) from various countries as Table Below:

Total orders received before and after Covid-19

3. Vaccine

Let us start with see a video how a vaccine can be injected to a human body:

https://www.youtube.com/watch?v=UNShk2PZCSk

Doctors and nurses need to wear gloves to inject vaccine if vaccines are available by end of this year and next year. How about if you need more than 1 injection per year? Even those recoverd from COVID earlier their antibody didnot last more than 6 months according to Wuhan research study.  I personally think vaccine may not able to eliminate Covid but in fact creates more demand for glove as multiple injections are needed over the years. 

Let see how vaccine injection are conducted (all wearing glove) from the news below:

1. https://time.com/5872243/moderna-covid-19-vaccine-phase-three-trial/

2. https://www.nytimes.com/2020/07/27/health/moderna-vaccine-covid.html

For those new to vaccine protection, please read two of the news below:

• Antibody or Antigen in your body may not last long even after you recovered from Covid according to WHO and France studies. You may need multiple injections in a year which create more demand for glove

Source: https://www.theguardian.com/world/2020/jul/12/immunity-to-covid-19-could-be-lost-in-months-uk-study-suggests

Source : https://www.sinchew.com.my/content/content_2306665.html

• Covid virus endergo mutation slowly, which make the vaccine development challenging (even lab development to vaccine trials need glove) 

Source: https://www.healthline.com/health-news/what-to-know-about-mutation-and-covid-19

According to World Health Organization (WHO), there are more than 120 Covid-19 vaccine candidates in development globally as of 5^th May 2020. The minimum cost of getting a single vaccine to the large-scale testing stage equivalent to USD 319 million based on one estimate published by the Lancet. Then again it would be something interesting to ponder on the justification of all these companies of willing to invest such a large sum of money into developing Covid-19 vaccine. I strongly believe they are not non-for profit organizations and they would have concluded that Covid-19 vaccine would be the best-selling vaccine of all time due to the severity and fast spreading characteristic of it. I would also believe that we have reached a stage whereby this virus would become another common virus similar to influenza virus whereby it might be around for a long time. However, we still have hope provided 70% of the world population would be enrolled in mass Covid-19 immunization program. Experts believe at least 70 percent of the population must be vaccinated to achieve herd immunity—when enough of the population is immune to protect the others by stopping spread of the virus. The sooner this target can be reached, the sooner the economy can fully reopen and a normal way of life can resume. The current world population is 7.8 billion as of July 2020 according to the most recent United Nations estimates elaborated by Worldometer. The term "World Population" refers to the human population (the total number of humans currently living) of the world. 70% of it equivalent to about 5.4  billion people would require immunization and therefore are we able to achieve this in one year’s time? This is another question to ponder on.

1. https://www.americanprogress.org/issues/healthcare/reports/2020/07/28/488196/comprehensive-covid-19-vaccine-plan/

2. https://www.bloomberg.com/news/storythreads/2020‐05‐08/the‐race‐to‐develop‐a‐coronavirus‐vaccine

3. http://english.astroawani.com/malaysia‐news/using‐compulsory‐licence‐affordable‐medicines‐200558

4. https://www.bfm.my/podcast/the‐bigger‐picture/health‐and‐living/doctor‐in‐the‐house‐what‐if‐we‐cant‐access‐life‐saving‐medicine‐for‐covid‐19

4. China Expansion not a big concern

Most of the Europe countries and US tend to avoid to buy PPE especially glove from china due to China already the world largest producer of Face Mask, ventilator and gown. This is mainly to reduce concentration risk which US and Europe don’t want to rely on china on all their major or critical PPE supplies.

Besides, gloves produced by Malaysia players have been widely accepted due to its quality and cost. Besides, we have a complete ecosystem including raw material supply, low and stable natural gas price and English speaking manpowers which is critical for FDA certifications 

Let see a few news that Europe and US rejected china-made medical PPE due to quality issues

1. https://www.bbc.com/news/world-europe-52092395
2. https://www.ft.com/content/f3435779-a706-45c7-a7e2-43efbdd7777b

5. Timely Expansion and Average Selling Price in July and Aug 2020

The expansion of Supermax come in great timing which they completed their Plant 12 which added 4.4 billion capacity in 2020.

PLANT 12

Block A - fully operational (Capacity - 2.2 billion per annum)

Block B (Target tostart commissioning for 1st4 double former lines by 3Q2020 and remaining 4 double formers lines by 4Q 2020, Capacity – 2.2 billion per annum)

PlANT 13 and 14 (expected to complete by 2H2021, capacity 2.8B and 1.0B)

On top of its existing expansion, supermax will add a new glove plant from 1H2021 (Plant 15 - 3.8 billion capacity) as the current tenant move out earlier than expected (according to CIMB report). Plant 15 building ready, just add new production line as it is currenty rented out. 

ASP uptrend intact Latest trend of ASP are:

June: USD160 per 1000 pieces according to company slides

July:  increase of more than 10% MoM (Month-on-Month)

August: increase of more than 10% MoM

Summary

• In view of higher ASP in July and Aug, I expect Supermax to produce a record high profit for Q4FY2020 and Q1FY2021 (July-Sept 2020) which is scheduled to be released in Aug and Nov 2020.
• Besides, aggressive and timely expansion of its Plant 12, and 15 will further boost its earning in FY2021 (July 2020 to June 2021).
• Strong export to US export for the period of April-July which normally US has higher margin (5% according to topglove news) and Supermx has a distribution centre in US.
• Supermax has aggressively increased its OBM contribution and also further reduced the numbers of dealers which can further improve its profit margin.
• All new plants of Supermax have been converted to Nitrile gloves line due to higher ASP and profit margin.

I may talk about how many glove are needed for one COVID test conducted in Malaysia hospital in my next article. I have done a simple survey on glove consumption for the COVID test in hospital which are conducted worldwide (more than 200mil COVID tests already conducted so far)  

If you interested on my analysis report, please contact me at davidlimtsi3@gmail.com

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Disclaimer:

This writing is based on my own assumptions and estimations. It is strictly for sharing purpose, not a buy or sell call of the company and the contents of this report should not be considered as professional financial investment advises or buy/sell recommendations. I strongly encourage you to do your own research and take independent financial advice from a professional before you proceed to invest.

I make no representations as to the accuracy, completeness, correctness, suitability, or validity of any information on my report and will not be liable for any errors, omissions, or delay in this information or any losses and damages arising from its display or usage. All users should read the posts and analysis the information at their own risk and we shall not be held liable for any losses and damages.