Rubber glove shares all take a beating

A healthcare sector analyst stressed that rubber glove companies were already paying corporate tax, which would have been higher than normal given their super-high profits.

PETALING JAYA: The rubber glove counters which have been charging forward, with no sign of the Covid-19 pandemic abating, suddenly found themselves in a bloodbath amid various developments involving the sector.

Some positive news on a vaccine, competition rising faster than expected and concerns of a potential windfall tax all attributed to the correction, market observers and analysts said.

None of the glove makers, not even newcomer Mah Sing Group Bhd, managed to survive the massive pullback which saw a sea of red for the entire trading day.

Heavyweights Top Glove Corp Bhd and Hartalega Holdings Bhd tumbled, which led the decline of the FBM KLCI that shed 18.57 points or 1.23% to 1492.40 points.

Top Glove lost 60 sen or 6.33% to RM8.88 while Hartalega went down RM1.20 or 6.30% to finish at RM17.84.

Kossan Rubber Industries Bhd slid the most in terms of percentage, down 9.96% or 81 sen to RM7.32. Supermax Corp Bhd lost 86 sen or 8.3% to RM9.50.

Other than the “Big Four”, other players such as Comfort Gloves Bhd also went down 41 sen to RM4.47 while Ruberrex Corp (M) Bhd lost 20 sen to RM2.64.

A total of 554.57 million shares related to rubber gloves, including that of Mah Sing, were traded yesterday, representing 6.54% of the total trading volume of 8.48 billion.

An analyst said the plunge in rubber glove stocks was due to profit-taking activities before the start of the results season again, coupled with positive news on a Covid-19 vaccine.

Hartalega is expected to announce its results next Tuesday while Supermax will be announcing sometime next week.

Kossan’s results are expected in the second or third week next month while Top Glove may announce in the second or third week of December.

On the potential implementation of the windfall tax, analysts believe it would still be a no go.

“I don’t think the talk is resurfacing. It has always been there but it’s more of how it’s going to be implemented.

“I still think it is unlikely to happen, ” the analyst said.

A healthcare sector analyst stressed that rubber glove companies were already paying corporate tax, which would have been higher than normal given their super-high profits.

“If there is to be a windfall tax, how much? Because that will ultimately affect their earnings.

“Of course the higher it gets, the worst off they will be, ” he said, adding that if rubber glove makers are to be slapped with a windfall tax, it has to be done very carefully in terms of how it will be structured and how it could affect other sectors.

The analyst said they have yet to hear any formal talk on the windfall tax but, as far as was gathered from previous engagements with the corporates, it was not likely to happen. “If it does, it will shed a negative light on our foreign direct investment (FDI).

“Gloves aren’t the only businesses doing well this year.

“The tech guys are also enjoying a good run.

“Does that mean other outperformers will have to pay windfall tax as well?” he asked.

MIDF Research said in a report that glove manufacturers are likely to beat their own all time high records set in the last quarter in the upcoming two quarters.

It said that the ASPs of gloves were still on an upward trajectory after the jump seen earlier this year while supply remained tight.

“Ex-factory prices are expected to grow by 30% to 40% in the third quarter of this year compared to the last quarter. Following that, there may be another increase of 40% to 50% in 4Q, ” it said, adding that ASPs were likely to remain high in FY21 based on a base-case scenario of vaccine availability in mid-2021 as the administration of vaccines would also require the use of gloves.

The research house also said that Supermax and Kossan were likely to be included in the FBM KLCI in the upcoming December review and this would increase the weightage of glove counters in the benchmark index to up to 40% from the 15% currently. Supermax and Kossan remained at the 16th and 23rd position respectively in terms of market capitalisation as of yesterday’s close.

Article type: metered
User Type: anonymous web
User Status:
Campaign ID: 18
Cxense type: free
User access status: 3

Did you find this article insightful?


86% readers found this article insightful

Next In Business News

Activist funds scupper Singapore firm's merger in rare victory
Oil prices jump after Opec+ inks supply compromise
Boilermech sees 20.64m shares traded off-market
Japan Credit Rating Agency affirms Maybank A ratings
Asian shares vault to record high as US stimulus seen within reach
China's exports, imports seen expanding at faster pace in November
Retirement savers to benefit from PRS tax relief extension
Asia Digital Bank to enter digital finance industry
China warns of risks of inflated credit ratings amid bond defaults
US expected to report slowest job growth in six months

Stories You'll Enjoy