CIMB Research sees stronger earnings for Supermax

Supermax to benefit from weak Ringgit

KUALA LUMPUR: CIMB Equities Research forecasts glove maker Supermax Corporation to record stronger earnings from 2QFY19 onwards. 

It said on Friday the growth would come from the full contribution from Block G in Perak by end-Sep 18, tailwinds from a weaker RM/US$, and iii) the recent decline in raw material prices. 

Block G is an existing plant in Kamunting, Perak that was revamped and now has a larger capacity of 1.4 billion pieces per annum from one billion.

However, Supermax’s contact lens segment is expected to remain loss-making. 

The company’s target is to grow its own-brand segment to 40% of sales (from less than 5% in FY18), via global e-commerce and its existing glove distribution network. The rest will be made up of OEM sales. 

“We expect this segment to continue to be in the red over the next one to two years due to higher advertisement and promotional costs in the near-term to drive sales more aggressively,” it said.

CIMB Research maintained its Add with a higher TP of RM4.47 as it rolled over to end-2019F. 

“Our target multiple of 18.3 times is still +one standard deviation of its three-year mean. We believe that Supermax’s risk-reward profile is appealing, as it is trading at a 45% discount to the sector’s CY19 P/E,” said CIMB Research.