Supermax remains an Outperform, with strong demand and widening margins as catalysts. We maintain our FY13-14 net profit forecasts and increase our FY15 number by 8.4% to factor in the added capacity from its new plant in Glove City. We continue to peg Supermax at 13x CY14 P/E (30% discount to Hartalega's P/E).

What Happened 
We were among 22 analysts who visited Supermax's manufacturing plant in Klang this morning. The visit started with a plant tour of its existing manufacturing plant that has been refurbished with new lines. This was followed by a tour of its two new plants which are under construction. These new highly-automated plants are designed for the production of nitrile gloves. During the visit, we were also briefed on the rubber glove manufacturing process, and given insights into the prospects of the group's business.

What We Think 
While the visit left us with a positive view of the prospects, the new nitrile glove plants with their higher operating efficiency was not a surprise to us as this had been ongoing for a while. The newlyrefurbished existing plant started operating since early this year while the new plants have been under construction since a year ago and will be completed within the next two quarters. Aside from higher production capacity which will enable the group to take in more orders, the highly-automated new lines coupled with the increased nitrile glove production should boost Supermax's profit margins. We think 2H's results should be good due to: (i) higher production volume from the refurbished plant, and (ii) higher sales of nitrile gloves that command more lucrative margins. Also, its associate profit should continue to improve as smaller manufacturers in Brazil close down.

What You Should Do 
Investors should accumulate Supermax. The company is poised to tap on the strong demand of nitrile gloves. This will happen as soon as its new production capacities from the new plants kick in within the next two quarters. Its valuation is attractive at 9x CY14 P/E.

Source: CIMB Daybreak - 04 September 2013, Full PDF Report