The Chinese yuan will continur to rise. This will.make China glove.makers less competitive compared with Malaysia.



https://www.ai-cio.com/news/look-out-dollar-the-yuan-will-keep-surging-says-ray-dalio/

Ben Tan, thanks for your data collection again . The 4.75 % MOM increase in shipment value from March 2021 to April 2021 proved that the ASP is either tapering or a slight increase . The ASP for both Supermx , Kossan and Harta can be estimated from their last qtr revenue and estimated shipment . There are in the range of US 78 to 89 per 1000 pcs . In Supermx last QR briefing , the management clearly told the Analaysts that the ASP for JAN/Feb/ March were US 84.6/87.65/89.2 respectively . This is the normal shipment prices from its contractual agreements . The management also explicitly mentioned that the ASP for this qtr ( April, May June ) will be between US 80 to 110 . It also mentioned that the spot price has came down to US 70 to 80 . The shipment for April could be slightly higher but not a lot because the production shutdowns for both Harta and Supermx were in Feb not March . Topglove shutdown was in DEC last year .

It is very unlikely that the shipment qty grew more than 40 % from March to April to comnpensate for the assumed ASP drop of 40 % drop in April from March.

I was tempted to invest in serba 1 or 2 years ago but put off by its huge debt. I lost 60k in.megan media 20 years ago when it run into illiquidity. Later it was found that one of its customers was.actually artificially created .This company bought hundreds of millions but never pay . The receivables kept growing until the company becomes illiquid. Since then , I am very careful with too high debt and too high receivables.company. I Stay out of such company.

It is amusing to see constant use of oversupply and declining ASP on glove sectors only to put fear on glove investors but not other sectors . Let me give you an analogy .

Let say you own a five star hotel in a city which the government had announced a year ago that there will be a few stadiums built near the city to cater for the coming Olympic game which will be held in the next 2 years .
The hotel has been giving you an average yearly earning of 10 millions per year . Because of the announcement more than a year ago , your hotel had been overbooked with rates rised up to 2 to 3 x . Your hotel earnings has skyrocked from 10 million a year to 250 millions a year and continue to rise. Based on the bookings with super good rates , you know that you will make another 500 millions for the next 2 year until the Olympics is over . You also know that the city will never be the same again because of more peoples are aware of this city and more tourists will be visiting this city .You had decided to build another another hotel which will completed at the end of next year using some of the profits made .
You started to receive calls from many brokers asking you to sell your hotels giving reasons like when the Olympics is over , your rates will go back to normal and there will be oversupply of hotels then . You receive more calls days and night asking you to sell by offering less and less from the high of 1 billions to 500 millions . Your cash in bank is about 150 millions but you know that with the anticipated earnings in the next two years , the cash on hand will grow to 500 millions .
Will you sell at 500 millions knowing that your cash in hand will be 500 millions in 2 years time and by then your assets will be two 5 star hotels instead of one .
As for me , I will not sell my two hotels for free when I know that my cash in hand will grow to 500 millions in 2 years time . Effectively the new buyer will get the 500 millions cash plus two hotels for free .
I will not sell based on the offer of numerous brokers and agents because their offer prices keep changing .Their offer prices does not reflect the worth of my hotel .

Glovefinish, you have a WARPED LOGIC,
For the past 40 years, planters have been planting more and more acreage of oil palms. The prices of palm oil has been growing up since the last 40 years with up and down cycles in between . Is there an oversupply of palm oil today? Similarly , more and houses are built every year but the house prices are.always on the uptrends with breaks in between. The glove makers have been adding capacities since 30 years ago. They have been.enjoying growths and making more and more profits. Do talk like you know the glove industry better than the glove manufacturers. They know how to pull the brakes and adjust accordingly. They own much much more shares than the foreign funds, local funds, big investors.and small investors . They are not selling off their shares but keep buying more .

moneymakers, the selldown has nothing to do with whether supermx is in klci or in.hijrah syariah index. Harta is in both indexes but the price is also bashed down .Topglove is still in.klci, it is still bashed down also.

Thankyouverymuch, may I know where you get the information that supermx was taken out from the syariah compliant stocks . Based on the edge report dated 28th may 2021, there were 23 new stocks taken into syariah compliant while 15 were taken out. I did not find supermx being in the list of 15 . There are a total of 740 syariah compliant stocks out of 936 in bursa .Are you saying.supermx is not in the 740 syariah compliant.stocks? Pls dont mix up with the Hijrah Syariah Component.index . Per my understanding , till today, supermx is still.syariah.compliant .

myinvestor, you are right . My assumption start with US 66.75 at the beginning of 2022 . I also start with a capacity of 36 billions.at the beginning of 2022. The ASP may go down gradually from 66.75 but the capacity may also go up gradually from 36 billions to 48 billions by end of 2022. Both should cancel out.

stockwin, you are welcomed.

newbie8080, where did you get the information " currently , ASP is dropping 10 % every qtr ?" Can you share your sources?

Stockwin , Thank you for asking this question . You can actually find the answers in my previous postings . I dont mind repeat it as follows .

Based on supermx management input , the Jan/Feb/MArch ASPs per 1000 pcs were 84.6/87.65/89.2 respectively . The managament also said that the next qtr pricing will be between US 80 to 110 and its capacity has been booked with contractual agreement and "lock in " ASP until the end of the year .
THe last qtr revenue should have been RM 1938 + 330 millions if not because of production shutdown due to covid infection . Last QR capacity is 26 billions per year or 6.5 b per qtr .
Hence , the ASP of last qtr QR is 2268/6.5/ 0.95/4.13 = 88.9

Since the next 3 qtrs capacity is booked with contractual ASPs , their earning per qtr is

Earning per qtr = 26/4 x 89 x 0.9 x 4.13 x 0.55 = 1184 millions per qtr

where utilization is 90 % and exchange rate is 4.13 and margin 55 %

In 2022 , the capacity will rise to 36 billions per year . ASP is expected to drop to average of less than US 70 even though management guidance stated that spot price is between US 70 and 80 . New contracts will be negotiated using this price .Since the capacity is already fully booked this year , new contracts with this price will be shipped in 2022.
Please note the leadtime is still at about 6 to 7 months .
Although management stated that spot prices has dropped between 15 to 25 % to US 70 -80 , I take the worst case scenario of 25 % drop rather the average . The assumed ASP is 89 x 0.75 = US 66.75 for next year shipment.

Its earning per year will be = 66.75 x 36 x0.9 x 4.13 x 0.45 = 4019 millions

My margin assumption is 45 % , a drop of 10 % from 55 % . This is a conservative number based on April- June 2020 margin of 43 % with US 40 ASP and July - Sept 2020 margin of 58 % with its ASP of US 58 . You can verify these two qtrs ASPs and margins yourself .
Hope my above estimation clear your doubts . Anyway ,this is barring any unforeseen circumstances like plants shutdown , shortage of containers or any others which can affect shipments .

Moneymakers , Even though supermx has a 1 to 1 split, its number of supermx shares 2.720 billions is still lower than Harta 's 3.427 billion shares for the whole company .That 's why the EPS for supermx is about 40 sen compared with Harta 's 30 sen although both made about 1 billion per qtr . The share price of Supermx d should be higher than Harta . right ?

OR are you saying Harta price should be lower than supermx 's current 4.05 ? Harta pre pandemic price is about 6 . Are you suggesting Harta price should be less than pre pandemic price ?

Moneymaker , Aiyoo , you know primary school maths or not ?
Harta capacity is about 40 billions per year while Kossan is about 32 billions and Supermx only 24 billions . All achieve 1 billions .Had supermx capacity been 40 billions per year , its profit would have been
40/24 = 1.666 billions . By end of this year 2021 , Supermx capacity will be 36 billions and by end of 2022 , supermx capacity will reach 48 billions . Do you own primary school maths lah .

Why you want to purposely ignore the Huge profits from its Distribution Division ? Supermx management had REPEATEDLY stated the dual income .

Moneymakers , again you like to speculate and make assumptionps without basis that such change of business model is limited only to pandemic situation . Keep your speculation to yourself . Lets hear what the supermx management say.

From Nomura Analyst report dated 6th May 2021 . THe 7th key takeaways of Supermx briefing in last QR .

" In the long term , management sees intense competitive pressure from new players which could bring down EBITDA and net profit margins down to 40 -50 % and 30-40 % respectively which is still SIGNIFICANTLY above its Profitability pre COVID 19 level . "

Pls note that the pre pandemic net margin is between 8 10 % only.

Moneymakers , the new OBM cum OWN distribution model will continue to stay even after pandemic . THis is the message from supermx management . Keep your own speculation and assumption without basis to yourself and your naysayers gang .

Moneymaker, it takes time to build own brand. It takes years or even decades to build up your brand .Once you have your own brand established, you can build your own Distribution channels and gradually reduce the agents, dealers, OEM and other middlemen. The opportunity came during the pandemic last year when.supermx decided to cut OEM from 30 % to 2 % , cut.all the dealers and increase the % to 58 % for own distribution. ALL these actions contributed to 25 x yoy earnings in last April Junr qtr. This new model.will.stay post pandemic

Let me share some FACTS on the the capacities and earnings of Harta , Kossan and Supermx respectively over the last few years until now .There is no sugarcoating . You can verify yourself .
Harta and Kossan capacities are always higher than Supermx by more than 50 % to 70 % .
Harta earnings before pandemic is about 4x to 5 x of supermx .
Kossan earnings before pandemic is about 2 x of Supermx .

Do you know why all of a sudden in 2020 until now , Supermx catch up and even surpass the earnings of both Harta and Kossan despite their capacities are still between 50 to 70 % higher than supermx ????

Supermx is the first to hit a billion per qtr earning among the 3 . Now , all the 3 are hitting the 1 billion per qtr despite Harta has the highest capacities and Nitrile percentage followed by Kossan. Nitrile command higher ASP than latexx gloves .

What is the magic which supermx possess since March 2020 that ENABLED supermx to equalise and even surpass Harta and Kossan earnings ???
It is none other than the dual incomes from both Supermx Mannufacturing Division and Supermx Distribution Division .

WE should not look at supermx as a pure manufacturing glove makers . Its Distribution Division after the Reorganization are making huge earnings after the reorganization of its business model .
Such OBM cum Distribution model is a differentiator .

To quote last QR statemement from Supermx Prospect Section .

" The expectation is that competition will intensify going forward , Nevertheless , we are confident that our sound business model and well established distribution networks built up since 1989 has prepared us well for all challenges ahead ."

The recent record Yuan appreciation , Oil prices going up further to US 70 which will make nitrile raw material butadiene and natural gas more expensive . Malaysia has great advantages over China in this areas . Intco is a new comer on Nitrile . Intco cannot compete with Malaysia glove companies which has been dominating the world markets with 65 to 68 % market shares in the last 20 over years . Even the cost of new capacity per 1000 is also more expensive in China . The equipment manufacturer also do not have the economy of scale in China compared with Malaysia which can supply not only to Malaysia but Thailand too .
THe fear of CHina glove makers are over blown .

monetary , you are right. Pls note that supermx prepandenic nitrile to latexx ratio is about 70 to 30 . Today is 76 to 24. Its new capacity of 22.8 billion is 100 % nitrile per my understanding. When it hit 48.billions, its ratio will be 90 to 10. Thr cost will be about 30 % higher according to sutp .

China is no more cheap. Take for example cost per 1000 of new capacity. China cost is US 16.90 vs Malaysia at about US 14. China cannot compete with Malaysia due to following reasons

1. Labour cost is more.expensive.
2. Natural gas which account.for 15 % of the tital cost is also more expensive
3. Cost of raw material of Nitrile gloves, butadiene is higher in China. Butadiene raw material is petroleum which is twice the price iof malaysia.
US dollar.will.continue to depreciate against.Chinese yuan which.will make the mfg.cost higher in china.
Being a new comer.to.US and Europe customers, they have to sell.lower price to penetrate the market. Lower ASP s and higher cost will sqeeze their margins. Understand from Sutp, INTCO gearing/equity ratio is 2.2 which show the company is in high debt.
These could be the reasons why Intco major shareholders are divesting.

https://www.theedgemarkets.com/article/cover-story-competition-china-low-foreign-shareholding-weigh-glove-stocks

Moneymaker , sure can guess but guess with some basis . Last QR , topglove shipment was lower than its previous qtr by 8 % .This was due to two weeks shutdown in DEC 2020 due to.covid infections on its workers. The last 3 months , I have not heard of any shutdown. Topglove stated in last QR.that this coming.QR plus next QR will be better than previous QR with higher ASPs and volumes barring.any.unforseen circumstances. Hopefully no containers shortage problem.

Moneymakers, why you said potential big waterfall for topglove coming QR ? Based on what?

The market is so funny. The chip shortages caused by pandemic and trade war resulted in the ASP s to go up . Many semicon chip suppliers made double or triple profits yoy in the last 2 to 3 qtrs Their PE s are more than 30 . How come no naysayers keep talking about ASP will drop which will be caused by over supply of chip one day. ?

https://asia.nikkei.com/Spotlight/Caixin/How-a-perfect-storm-created-the-global-chip-shortage

Day or weekly traders mentality are different from investors who look at much longer terms . I used to ask my grandfathers how long it take for oil palm to grow fruits ? He told me at least 5 to 6 years. For the whole period from planting to first harvest , the farmers need to put fertizers, clear the weeds and spray insecticides if there are pests. Besides no incomes, farmers have to spend money somemore on their trees. This is called investing. Asked around those who had invested in oil palms before 2000 what is their return now. You will be surprised many are millionaires now.

supermx management denied forced labour . From 2019 onwards, supermx already implemented zero debt bondage hiring.

https://www.klsescreener.com/v2/news/view/836133

Total lockdown to cut glove production. Pricing might increase due to global supply shortage. From CGS - CIMB.

https://themalaysianreserve.com/2021/06/01/total-lockdown-to-cut-glove-production/

invest malaysia , yes technical rebound. It takes 50 days moving average to cross 200 days moving average to confirm.uptrend. right ? I am not good at TA but only good at.factory SPC and Design of experiments.

coming . going to add more . looks like inflexiong is 4 yesterday.

I begin to see the inflexion point already. Hope is not false alarm. Keep monitoring

Supermx earnings for the next 7 qtrs are expected to be about 7 billions. Together with 4 billions cash in bank , the total will be 11 billions. This is equivalent to rm 4 .00 per share. If you buy at 4.00 you are basically
buying the cash in bank at rm 4 per share with the company free of charge. Using Toneefa analogy , you are buying a nice LV bag for 10,000 with a 10,000 cash inside the bag. The bag is basically free and this bag will continue to grow money inside every year.

Adcool, you are sharp on your observations. Total number of cases does not equate to glove deman and more so glove prices .During Jun/July/Aug/2020, the number of cases in.US and the whole world is only a fraction.of this year but its demand during this period last year is so high that the leadtime went up to more than a year.and the share price is more than double of this year price. There is no co relation at all.

moneymaker, that is how you estimate supermx earning by using topglove numbers and then agak agak ? Aiyo, dont laugh me die lah. Take lah , Nomura numbers or RHB . Nomura also international Analyst mah. Why have to agak agak using top glove numbers for supermx ?

Money maker, you dont get what I meant . Supermx is not even covered by JP Morgan. Where did you get the numbers? Cooked up ?

chief999, you have actually summarised the Analyst report quite well on May 8th. I supposed this summary is from Analyst of NOMURA. It takes ne longer time to digest Nomura report. Thumbs up.

Moneymakers, Did JP Morgan cover.supermx, I understand that JPM only.cover Topglove, Harta and Kossan .JP gave TP of 3.50 for topglove , 8.50 for Harta and 3.80 for Kossan. Supermx is not on JPM.radar . Are you sure you number come from JPM or you create your own. Why dobt you take the 6 Banks analyst estimations?

Moneymaker, how you get the figures 2022 earning will be 500 millions / qtr only ? By end 2022 ,capacity.will be increased to 48.millions. Can you share how you arrive.at the numbers?

The glove investors actually do not give positive views on the listing in HK because of dilution. Also, topglove is not short of cash. This news will be welcomed by investors. I also have Topglove shares. I am happy with this news.

Stockisnotfun. the KLCI.broke new highs again to about 1900 in 2014 and 2018 after the two financial crisis in 1998 and 2008

You and other naysayers are the ones which put fears and "" infected ""the markets to sell low. See how much damages you your buddies had caused? If you said you had sold at the high of above 6 , that means you had also bought low quiently earlier by putting fears on those retailers. Now you are doing the same again so that you can.re enter low again and then sell higher when it rebound .

GloveOff, Why you want to re enter if in your mind Supermx do not have value ? Go to your Airasia and Genting and promote there . Why waste time here and keep telling peoples how bad supermx is . Anyway I am still waiting at the inflexion point to re enter .

Moneymaker , hahaha , you just take the one day data to instead of longer period ? Aiyo , this is not the way to show statistics lah . You can also pick one chain smoker who live until 90 years old and tell the world smoking can prolong life to 90 leh ? What type of statistician ?

In every crisis , there is opprtunity . Look at history to gain some insights and wisdom . I have seen the superbull in 1993/94 when the klci hit 1300 and went down to 250 in 1998 and also the another peak of 1500 in 2007 and came down to 800 plus points in late 2008 . The 1998 asian financial crisis wiped off 80 % of stock market value. Many are fearful companies will go bust . I entered during this time but chose only financially sound companies like Public Bank, Maybank , Tenaga , TELEKOM . Within a year , the index rebound to more than 700 in 1999. By early 2020 , the index hit 1000 again.
In 2008/9 crisis , I bought public bank and supermx . Both gave me good return in 2011 .
The strategy in these crisis is to look for badly batterd companies in market prices but fundamentally the companies are financially sound with good track record of making money every year for the last 20 years .
Be fearfull when everyone is greedy , be greedy when everyone is fearful . This is the Contrarian approach by Warren Buffet .

Moneymaker , where did you get the information that when Supermx was included in klCI , the price went up 10 % ? Based on what I found , when supermx was included in klci in Dec 2020 , the shareprice went down from rm 8.50 to 5.50 at the end of Dec . The price continued nosedive with some technicl rebounds to 7.00 in Jan 2021 and 6.45 in April 2021 till now at about 4.00 . Taken out from klci will be a non event .

Malaysian glove makers account for 68 % of world supply. These partial shutdown will lower the supply . ASP will.be maintained at longer period with supply partially and temporarily.affected. Last.qtr was even.worsed when topglove , harta , supermx and comfort.were all affected with production.shutdown and containers shortage but still managed to delivered record profits. Hospitality industry and.airlines are not as lucky. They have almost zero business and continue to lose hundreds of millions.

I am still waiting for the inflexion point and then enter

FairTalk, you are welcomed. You.just need to.compare the supermx Financials ( Rev, PAT and Net Margin ) of April to June 2020 Qtr with the other 3 , you will.notice a world of difference . The sharp increase in Earnings snd margin is not due to big price increases, Otherwise, the.other 3 makers should see the same sharp increases. This qtr is the first qtr of the pandemic. The price increase is minimal at 15 to 20 % but supemx has 25 x yoy earning increase. This is the qtr Supermx re organise its business model .

Toneefa , Although supermx management committed capacity expansion to 48.2 billion pcs pa by end of 2022, I do believe they will add further in 2023 and 2024 to 60 nillions or more. I did a simulation by assuming the nitrile price go back to US 23 and latexx to US 18 ,the pre pandemic prices , the company.can.still make above 3 billions per year. The 58 % OBM cum own Distribution business model is a.great.differentiator from the others. Unfortunately, very few investors realise this . The devil is in.the details. Only those who know it will know the true value of supermx.
.

Tonee, Thks. Ya. I did not sell during the time above 6 because I am.waiting for higher tgt at 8.00 . Based on.my projections and also the IBs , the next 2 qtrs total earnings will be about 2.2 to to 2.4 billions. The rolling 4 qtrs eps will then be rm 1.60 . At rm 4.00 , the PE is ONLY 2.5 which I have never seen.in my whole life for a company which earn a few billions per year and have such a huge cash piles. I just target PE of 5 . This will give me rm 8 . The other 3 big glove makers are trading at PE between 5 to 11. My tgt is very conservative. I think the foreign and local funds are also salivating and wait for the right.moment to strike . If the price still.remain.below 4 on the 7th June, I. will use my dividend to add more.

Tonee, I usually buy on the way up . The last time I also enter at 4.00 after naysayers pushed down the prices to 3.80 and then when it rebound , I entered at 4., 4.4 , 4.6 all the way to 5.20. When it rebound , it will be fast and furious . Within 3 weeks, it hit 6.45.

Toneefa, i havent added any yet .Still waiting for the inflection point , possibly below 4. I will add more at this point.

Press Release On Supermx commitment to ESR


https://www.klsescreener.com/v2/news/view/835097