PETALING JAYA: The stronger ringgit is not beneficial for glove exporters, as it poses a risk – considering that all average selling prices (ASPs) are in US dollars.
BIMB Securities Research said a firmer ringgit, now edging well below US$4, represents a direct translation risk.
“With ASPs fully dollar-denominated, every 1% strengthening in ringgit reduces reported revenue in ringgit terms without a corresponding 1% decline in cost base,” it said in a report.
According to the research house, a report from last December indicated that a sensitivity analysis suggests a 10% foreign-exchange (forex) rate appreciation could erode earnings before interest, taxes, depreciation, and amortisation margins by between 2.7% and 9.4%, depending on each player’s cost structure and hedging profile.
However, it noted that after management engagements, indications are that selective ASP adjustments are underway in response to the sharper ringgit movement.
“Pricing power remains customer-centric and segment-specific. Higher-specification and US-bound products appear to have better repricing traction, suggesting Malaysian producers are not operating purely as price takers,” it said.
BIMB Securities Research cautioned that timing is critical. If forex appreciation runs ahead of ASP revisions, near-term quarterly earnings could still reflect volatility before repricing fully flows through.
On cost efficiency, the research house said cost gains remain a cushion for now, but the sector has not yet faced this headwind under cost stress.
“Natural rubber latex has remained largely stable, crude oil continues to trend lower, and nitrile prices, while showing an uptick in recent months, are still below prior peaks,” it noted.
In addition, labour costs are more contained, and with utilisation rates improving, fixed-cost absorption has strengthened, lowering per-unit production costs.
“Collectively, these factors provide a meaningful near-term margin buffer, but that cushion could narrow if the ringgit continues to strengthen further,” it said.
With that, BIMB Securities Research maintained its “neutral” call on the sector, viewing its risk-reward profile as broadly balanced.
“Our valuations already embed a degree of forex sensitivity, and our base case continues to assume dollar-ringgit of RM4 to RM4.10 for 2026-2027 under an orderly appreciation scenario.”
