Short Position - MGRC, population, rubber gloves


THE issue before us is no longer overpopulation, it is going to be a falling population and that has billionaire Elon Musk worried. He went on to tweet that the drop in global population will lead to the collapse of civilisation and if you look at it, there is a lot of trouble if the number of people starts to shrink.

MGRC’s erratic share price

FOR a company still being an affected listed corporation pursuant to Rule 8.03A of the listing rules, it is strange that the share price of Malaysian Genomics Resource Centre Bhd (MGRC) had spiked to a high of RM2.57 on Nov 30.

At that price, the health technology company would have had to have profits of over RM31mil to justify a price earnings multiple of only 10 times.

Instead, this is a company that reported a measly profit of RM240,000 for its first quarter ended Sept 30.

In fact, it reported a loss of RM4.3mil for its full year ended June 30.

Those numbers don’t seem to have much correlation to its yo-yoing share price.

Since the end of October, MGRC’s stock price has been under pressure.

It is down 70% in the last five days alone.

The sudden drop of its share price has resulted in the company receiving two recent unusual market activity queries from the stock exchange.

In both instances, the company says it knows of no reasons why its share price has fallen except for the entry of two new independent directors and a new substantial shareholder has increased its stake.

There have been a number of shareholding changes to the company.

Notably, MGRC remains categorised as an affected listed corporation pursuant to Rule 8.03A of the ACE Market Listing Requirements following the disposal of MPath Group, which provides pathological and medical laboratory services, in December 2019 for RM42mil.

The company has until Dec 23 this year to submit a regularisation plan to the relevant authorities for approval.

MGRC plans to diversify into the biopharma and healthcare business.

It is left to be seen if this can be done successfully to lift itself out from the affected listed corporation status.

More people needed

THE issue before us is no longer overpopulation, it is going to be a falling population and that has billionaire Elon Musk worried.

He went on to tweet that the drop in global population will lead to the collapse of civilisation and if you look at it, there is a lot of trouble if the number of people starts to shrink.

Just look at China and even Singapore.

Both countries famously had a one-child policy that have since been repealed.

THE issue before us is no longer overpopulation, it is going to be a falling population and that has billionaire Elon Musk worried. He went on to tweet that the drop in global population will lead to the collapse of civilisation and if you look at it, there is a lot of trouble if the number of people starts to shrink.THE issue before us is no longer overpopulation, it is going to be a falling population and that has billionaire Elon Musk worried. He went on to tweet that the drop in global population will lead to the collapse of civilisation and if you look at it, there is a lot of trouble if the number of people starts to shrink.

In fact Singapore pays you to have more children now.

There are many reasons for the drop in the number of couples having large families.

For one, it is no longer cheap to raise a child.

Back in the day, if a child graduated with just a school-leaving certificate, getting a decent job was assured.

Then the pre-requisite became a university degree, which keeps escalating in terms of costs.

Also as women head into the workforce, the overall costs associated with raising a family will also go up.

The reasons are unique for each couple but they are varied.

But in global history, except for periods of natural disasters, wars and pandemics, population has always gone up.

But now, it is starting to decline. As the world starts to age, including in Malaysia, that will present a great deal of challenges to policy makers, businesses and people.

With the productive workforce getting older and greyer, more burden will be placed on the younger population.

Fertility rates are falling below replacement levels and it is going to create a huge problem for government officials and businesses.

People consume goods and services, and as population falls, the broader levels of consumption are expected to also drop.

That is going to create economic crises throughout the world. It is no longer whether the world can handle a larger population, it has shown that it can with more efficient usage of resources, but how is it going to cope with fewer people?

It is maybe wise for Malaysia to look at itself and see how to capitalise on immigration as a means to support a growing population. Maybe, people will become an essential economic resource that will be widely fought over in the decades to come.

Going full circle

RUBBER glove stocks were the talk of town more than a year ago. They were seen as a sure-fire money maker given where the prices of rubber gloves headed given the status of the pandemic.

The results of rubber glove stocks were keenly watched. Each announcement brought gasps of wonderment that had rarely been seen.

Fast forward to today, and it has almost come full circle for the stocks.

Top Glove Corp Bhd’s results showed there is still money to be made in the rubber glove industry but it is not what it used to be.

Top Glove Corp Bhd’s results showed there is still money to be made in the rubber glove industry but it is not what it used to be.Top Glove Corp Bhd’s results showed there is still money to be made in the rubber glove industry but it is not what it used to be.

One year ago, Top Glove made RM2.36bil in net profit for the first quarter of its financial year. This time around, for the first quarter of its financial year ending August 2022, it reported a profit of RM185.7mil.

The reason for the drop in profit was the fact that the average prices of rubber gloves are normalising and so is global demand. As prices and sales volumes fall, they will affect profitability and total dividends paid.

That financial performance sent reverberations right through the industry. As a grouping, healthcare stocks plunged with Top Glove losing 10% of its share price to RM2.16 a share. Rival Hartalega Holdings Bhd shed nearly 6% and Supermax Corp Bhd dropped 6%.Low barriers of entry meant that there were a number of other non-glove players that jumped into the industry when it was red-hot.

It is worth watching what will happen to the stocks that rode on the coattails of the glove industry. The established players have the prerequisite scale and customers to ride out this period of weakness. They have the moxie and knowledge which the new entrants are trying to get.

It might be a rough ride for the industry ahead.

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