KUALA LUMPUR: RHB research expects progressive growth in Comfort Gloves Bhd
's earnings due to ongoing capacity expansion and emphasis on R&D and growing demand in speciality gloves.
"This should bode well for Comfort Gloves given its niche in premium
specialty gloves," it said in a note.
The research house moted that the group has a total of 49 production lines that can produce up to 430 million gloves/month.
It is expected to add another six new lines, which can collectively produce up to RM490 million pieces of gloves/month.
RHB believes more capacity will be added beyond its current expansion plan as the group proposed to acquire about 39 acres of land in Perak in 2018.
RHB maintained its buy call on the counter with a target price of RM1.08.
In 1QFY20, Comfort Gloves' earnings of RM8.4mil met expectations at 25% of RHB's full-year estimates.
"Earnings grew 14.5% YoY, mainly due to higher sales (+13% YoY), while net margin was maintained at 7%. QoQ, PBT nudged up 2% despite sales falling 8%, as the group recorded higher profit from the sale of specialty gloves, which typically fetch better margins.
"That said, 1QFY20’s earnings fell 10% QoQ on higher effective tax rate," said the research house.
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