KUALA LUMPUR: Affin Hwang Capital Research has upgraded its call on Supermax Corp Bhd
from Hold to Buy with a new target price of RM3.10 as the price-earnings discount against its peers has widened significantly.
"It is currently trading at an undemanding 11.8x FY18E EPS (60% discount relative to peers). We believe that SUCB, like its peers, should continue to benefit from the ongoing glove
shortage, despite the legal issue surrounding its founder," it said.
The research firm said investors are concerned over the recent sentencing of Supermax founder Stanley Thai to five years in prison for insider trading, and that these concerns have been priced into the current share price.
It does not expect any further negative impact on the share price from the result of an appeal over the case.
Supermax will also likely benefit from the vinyl glove supply disruption in China, which should help it drive earnings growth for FY18E, said Affin Hwang Research.
" We have raised our FY18-20E earnings by 8%-11%, to factor in the better growth prospects. However, consensus is less optimistic on SUCB’s outlook, as SUCB’s annualised net profit based on 1QFY18 is 10% higher than the consensus forecast; in our view, successful delivery of earnings growth would be the key re-rating catalyst for the stock in the near term."
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