Business News

Published: Thursday March 7, 2013 MYT 12:00:00 AM
Updated: Thursday April 18, 2013 MYT 1:21:27 AM

CIMB Research keeps Supermax an Outperform

KUALA LUMPUR: CIMB Equities Research is maintaining its Outperform recommendation on glove maker Supermax.

It said on Thursday that it was maintaining its earnings estimates and target price of RM2.37, still based on a 10.6times forward price-to-earnings (P/E), or 25% below Top Glove's two-year average P/E of 14.15 times.

"The stock would be catalysed by stable costs, strong glove demand and efficiency gains from new capex," it said.

CIMB Research said in a change of tone from previous meetings, Supermax indicated that it expects nitrile demand to be strong.

The company plans to increase its mix of synthetic gloves to meet this demand.

"Supermax's product mix is now 35% nitrile and 65% natural rubber, but management expects nitrile to make up more than 50% of Supermax's glove sales in the next few years.

"Supermax will spend RM65.8mil in 2013 to automate its manufacturing process by upgrading old lines and installing new technology at its facilities. The higher rate of automation is expected to reduce Supermax's dependency on low cost labour, saving the company RM20mil to RM25mil this year," said the research house.

Tags / Keywords: News, Business, CIMB Equities Research, Outperform recommendation, Supermax, Business

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