Posted by bsngpg > 2014-08-23 07:49 | Report Abuse

How about this scenario:
Q2FY14=4.5cents. Annualized 18cents. PE at 10x(less efficient and second tier gloves mfger), thus fair value=rm1.80.

Posted by kiong2014 > 2014-08-23 10:15 | Report Abuse

how you get Rm1.80 ?, according to recent TTM the PE at 12.37..

Posted by bsngpg > 2014-08-23 11:32 | Report Abuse

scenario=case study=assumption.

In this case, I assume Spmx worths PE 10x with estimation on eps 4.5x4=18 cents, thus I derived its fair value at RM1.80.

The pertinent questions are
i) how much does you value spmx? at PE7x?, 10x? 12x? or 17x ?
ii) how much do you estimate its eps? 4.5x4=18cents? 8x4=32cents ?

Good luck.

Posted by itjustabouttheprofit > 2014-08-23 11:52 | Report Abuse

I taking the average PE ratio among 4 top glove company in Malaysia, 17.42 {(12.34+23.01+18.03+16.3)/4}. Our glove company have a multinational company. Hence using PE10 is just not a relevant basic. PE10 only use for the company which is small and more localize company.

Posted by Feimaw > 2014-08-23 11:59 | Report Abuse

No point one. Epf will throw again and again when it start to move up unless got very strong foreign fund which can absorb. Otherwise, retail investors are too tiny to push the price up to where it suppose to be

Posted by kiong2014 > 2014-08-23 12:12 | Report Abuse

why epf is keeping dumping shares from time to time??.,since the supermx look bright in next year and their share price is fair and cheaper among them,is it worth to accumlate now ?.

Posted by Gokula Krishnan > 2014-08-23 14:24 | Report Abuse

At PE 10, which seems low to me, if eps 18 cents ok, fair 1.8. If they do eps 24 cents, that's 2.4 at low PE. If as it said here next year can expect eps 32 cents, then even at PE 10, that's 3.2 myr. That's 30% MOS for investors who can hold a year. I doubt PE 10 is fair. PE 12 seems fair but as u all say, it depends on what u are willing to give as premium to supermax. Quote ideally the question is, can they generate eps of 8cents. Anyone studied these guys well enough?

Posted by Gokula Krishnan > 2014-08-23 14:26 | Report Abuse

The downside of this counter is, it's a political play with epf. As the founder is pro Pakatan, epf could purposely control the share price from shooting too much by going in and out on this counter.

Posted by Bruce88 > 2014-08-23 15:24 | Report Abuse

If you think it is "undervalue", use TA to time the entry. In actual fact,
the counter is in "downtrend" now ! so not the right time to buy. LOL

Posted by JT Yeo > 2014-08-23 15:32 | Report Abuse

Look at a bigger picture, glove industry is close to be a commodity thing, yea maybe one firm can differentiate it's glove from other through technology like thinner but in the long run, as long the technology isnt patented, everyone can enjoy it, so the selling price is more or less dictated by market demand, no buyer will say oh I prefer Supermax glove over Topglove or others.

With that in mind, the firm that can win is the one with the lowest cost, either from raw material or management efficiency or other ways. Now you have to ask, Hartalega being the one with best profit margin in glove now, does Supermax has the ability to make glove at a lower cost than Harta? This is important because if one day Harta decide to go to war with Supermax, Harta can virtually lower their selling price to the point Supermax cant make any money due to higher cost. Although that isn't a likely scenario.

In spite of saying that, you can still make money from their shares, they take more loan or raise more money, buy land buy factories, produce more gloves, naturally revenue will rise, share will go up, and repeat.

Posted by JT Yeo > 2014-08-23 15:43 | Report Abuse

MY personal opinion is go for the leader in the industry with the best ROE and margin. OF course now harta is consider fairly or overvalued. Unless Supermax is super deeply undervalued. Nothing wrong with predicting EPS or a fair PE, but the market decides the PE, whether you think PE 10 is too cheap, the market can make it stays at PE 10 for many years.

Posted by bsngpg > 2014-08-23 16:13 | Report Abuse

JT Yeo: thank you very much for speaking out what I have in my mind but do not want to spell out directly. You know the industry very well. You are great. Thks.

Posted by itjustabouttheprofit > 2014-08-23 17:10 | Report Abuse

JT Yeo: Yes maybe now harta has the highest profit margin in the glove industries but Supermax is catching from the back. Just for your info, Supermax now on the process on transforming all of the human-dependent machine to high automated machine. As investor, we are now seeking for the best capital appreciation. Hence, for now, if you wan to appreciate your capital to the maximum, invest in Supermax as the EPS will be skyrocketing in 1 year time as the company now in the way to transform to highly automated machine.

Posted by itjustabouttheprofit > 2014-08-23 17:14 | Report Abuse

In glove industries, you cannot make an assumption that your company will always be the market leader. Market leader now not necessary is the market leader for future. As investor, we are seeking the best way to appreciate our capital. Hence looking for the percentage of EPS improvement is the best way to increase your capital.

Posted by JT Yeo > 2014-08-23 17:28 | Report Abuse

yea i suppose if you hold Supermax for the short term, perhaps you can make some money. You are right Harta might not be a leader forever then you gotta come out with something solid that Supermax can overtake Harta. Well it depends, if FCF is weak, EPS skyrocket will come at the cost of share dilution or high borrowing cost, that would cancel out the gain too.

Posted by JT Yeo > 2014-08-23 18:17 | Report Abuse

My opinion is dont worry too much about EPS or PE, study their competitive advantage. If you are obsessed with EPS, give your estimate 30-50% discount. Supermax keeps a record of all the research house that cover their shares. Several research written at the end of 2011 estimates the EPS for 2011, 2012 and 2013, on average their estimate is off by 8-10%.

As for PE, CIMB Analyst Terence Wong, a CFA gave a TP of RM3.76 at the end of 2013 based on PE of 13.5, a 30% discount to Harta's PE back then, Supermax was trading at RM2.67 back then, hit RM3+ in January and downhill. Not saying anything bad about him, and he did make some right TP before, but it tells you a professional analyst with all information at hand can get it wrong too, thats how hard it is to make estimate. If professional can be wrong while giving a 30% discount to Harta's PE, taking industry average PE of 17 is very optimistic when Harta's current PE is at 22 now, 30% discount should be PE 15, and you can still be wrong at PE 15 just like Terence Wong.

So if you estimate EPS of 21.41 for 2014, give that a 10% discount, make it 19.26. For PE, give it a 40% discount to Harta's PE 22, that will be 13.2. So EPS 0.1926 cents x 13.2PE = RM2.54. That will be more in line so you have more margin of safety if anything goes wrong.

Posted by soon9913 > 2014-08-23 19:59 | Report Abuse

Thx both. Yes n No answer. Nothing right ot wrong.
I would say PE13 for supermax is quite fair based on current market.
Agreed with writer- buy at your own risk n I think he did a good job!

Posted by bsngpg > 2014-08-23 20:02 | Report Abuse

You understand the industry very well and had made very logic and good assessment. Although this does not guarantee 100% accuracy, at least we have used our best know-how to assess. I believe you must able to make good return if you have investment in gloves counters. Today, I am lucky to have chance talking to people who really know the industry.
Good luck.

Posted by Gokula Krishnan > 2014-08-23 20:28 | Report Abuse

Good discussion guys.

Posted by anbz > 2014-08-24 07:35 |

Post removed.Why?

Posted by Gokula Krishnan > 2014-08-24 09:09 | Report Abuse

Anbz? What point are u exactly trying to make? That if u support PR u r arrogant?

Posted by matakuda > 2014-08-24 10:42 | Report Abuse

Agreed with anbz. If you want to invest, stay out from politics, or at least do not openly state your preference either PR or BN. Look at our poor uncle, he invests heavily in mudajaya, yet he openly declares he bought muda on margin finance, his support for PR is not a secret, mudajaya has been deprived of infra jobs for 23 straight months as a result. Lessons learnt, stay out from politics if you want to be in the investment game. Do you think the local government hospital would ever be allowed to use supermx gloves? If they do, do you think our UMNO friends would keep quite?

Posted by Gokula Krishnan > 2014-08-24 12:58 |

Post removed.Why?

Posted by JT Yeo > 2014-08-24 13:42 | Report Abuse

well mudajaya is heavily focused in malaysia and involve in industry that have to go through government, gloves are more of an export business, so wont be that bad

Posted by cheongcy > 2014-08-25 15:03 | Report Abuse

I do not think Harta is overvalued and Supermx is undervalued. Quite the contrary, I believe Supermx is quite fairly valued, if not already fully valued. The 'Big Four' gloves manufacturer, I may arrange in this sequence(from best to bad), Harta,Topglove, Kossan, Supermx(at least for the time being)

Posted by pingdan > 2014-08-25 16:01 | Report Abuse

PE23 not overvalue but PE13 already fully value. What is this world? Look at topglove, PE16, Kossan PE18, Supermax PE13. Is it PE23 better than other company? What is the basic that you say supermax is the 4th best among top 4 glove? Do you study what happeningnto aupermax? They reducing the quantity due to the fire not becauae they cannot compete with other. Hence it ia invalid to aay that aupermax is the 4th among them

Posted by pingdan > 2014-08-25 16:03 | Report Abuse

If u invest based on the market price performance, then your earning will be limited

Posted by cheongcy > 2014-08-25 16:34 | Report Abuse

Hello, pingdan, let the time proves itself, say 2 years after from now on which will have better performance in terms of market price as well as profitability.

Posted by pingdan > 2014-08-25 16:49 | Report Abuse

Anyway, anyone know what is the competitor advantage of harta? 1st producing nitrile glove which is higher margin than rubber glove (They producing 100% nitrile yield). Second they do not have any bank borrowing which make cost save on interest. 3rd they using automated machine which is less dependant on staff cost. 4th they have the lightest glove in the world. Other than that, harta is the world largest nitrile glove producer.

Posted by pingdan > 2014-08-25 16:55 | Report Abuse

I dun know what will happen in 2years time. Among top 4 glove, Supermax will adding the most glove in term of number of glove and.percentage in 2014 compare to other 3. Also, Supermax having a inter-switch machine between rubber and nitrile glove. Imagine what is the growth percentage in term of EPS in 1 years time? Other than the EPS factor, PE also undervalue. Now, Supermax are heading to add more production in nitrile glove. Hence I think the profit margin will be improve and highly automated machine will further improved the profit margin. Hence 2014 is the year for Supermax!

Posted by bsngpg > 2014-08-25 21:35 | Report Abuse

分享冷眼名句精华：
“不了解，不买”
“深入了解，勤以追踪跟进公司发展。若是只流以表面，似懂非懂，最是危险”

Posted by itjustabouttheprofit > 2014-08-25 22:26 | Report Abuse

never mind. Result coming out this week. Let's see how it's performed. Good luck!

Posted by JT Yeo > 2014-08-27 11:07 | Report Abuse

With the latest 2Q result of 3.93 cents, your estimation of 4.5 cents is already off by 14.5%. Not saying you are wrong and im right, just saying again estimating EPS is a very tricky math, unless the business itself has a strong record of stable earnings like say Public Bank, then estimating it's EPS will be more accurate and less surprise.

Posted by soon9913 > 2014-08-27 22:26 | Report Abuse

I remember the mgt said they bought revenue insurance n therefore insurance co shall compensate the financial loss caused by fire. Wondering why the report never mention about insurance claim...? Maybe expert here can answer my doubt?

Posted by Horsefield > 2014-09-18 00:40 | Report Abuse

Good write-up and very good discussion here..
I think one should look at a company's operating efficiency (especially ROIC) & risks when coming out the fair PE.

High efficient company (literally high ROIC)can generate higher FCF as compare to a low efficient company for the same amount of capital. FCF is the owner earning, not EPS. Hence, a high efficient company deserved high PE ratio than a low one.

A stable market leader generally has lower risk. I think it is quite risky in investing Supermx as you can see from the recent fire incident. Can you assure no fire incident will happen again in near term?

So, do you think Supermx with PE of 10 is fair, overvalued or undervalued? Don't forget PE ratio can be misleading if you compare a company have huge net debt to a net cash one.

Posted by cheongcy > 2014-09-19 16:15 | Report Abuse

The flawed logic of PE -"To estimate value, we require an estimate of value" -Expectations Investing