PETALING JAYA: Value has emerged in Supermax Corp Bhd , according to RHB Research Institute as it upgraded its call on the glovemaker to “buy”.
The brokerage has indicated potential buying opportunities in the stock following the 8% decline in its share price year-to-date, despite the glovemaker’s “robust 2019 core net profit growth estimated at 17%”.
Supermax’s net gearing has also declined to 25% in the second quarter of financial year 2019 (2Q19), as compared to 28% in FY18.
RHB Research Institute has maintained its target price for Supermax at RM1.85, implying a forward price-to-earnings ratio of 16.5 times for 2019.
The earnings forecasts were also left unchanged.
Commenting on Supermax’s recently-announced results, RHB Research Institute said that the company’s core net profit of RM68mil was in line with expectations, “reaching 56% of our and 52% of street FY19 estimates”.
“Excluding the one-off RM6.5mil insurance claim for consequential loss due to fire at its plant in 1Q19, the first half of financial year 2019 (1H19) core net profit grew 28% year-on-year to RM68mil. This was helped by a 16% increase in revenue during 1H19, and lower effective tax rate of 30.2%.
“The lower effective tax rate was due to lower tax rates in foreign jurisdictions and higher capital allowances claimed amid ongoing capacity expansion,” it said.
In a separate note, CIMB Research said that Supermax’s total glove production capacity is expected to grow by 25.6% to 28.1 billion pieces by end-2019. Following the completion of the upgrading works at one of its existing plants, Block G in Kamunting, Perak in Oct 2018, Supermax began upgrading works on a new plant in Klang, Selangor.