Thursday , March 4 2021

Malaysian rubber glove year of mixed treasures Money



Overview of the Glove Top Glove Factory, November 24, 2020.  - Picture of Yusuf Matt Isa
Overview of the Glove Top Glove Factory, November 24, 2020. – Picture of Yusuf Matt Isa

KUALA LUMPUR, Dec. 6 – Malaysia has shipped 240 billion pieces of rubber gloves globally, meeting nearly 70 percent of the 360 ​​billion pieces in global demand by 2020, making the star industry amid a worse pandemic of more than 65 million. 1.5 million lives globally.

Domestic companies such as Top Glove Corp Bhd, Hartalega Holdings Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd have always been in the spotlight as demand for rubber wristbands has increased not only for medical but also for non-medical purposes, especially food and beverages.

The industry has proven to be extremely profitable as companies like Luster Industries Bhd, whose primary activity is the production and sale of precision plastic parts, as well as property developer Mah Sing Group are diversifying into the production of rubber gloves.

However, with the growing demand and fame brought by Covid-19, come unprecedented responsibilities and challenges, making it a year of mixed wealth for the industry.

A rubber glove protects the pet of Bursa Malaysia

Rubber glove manufacturers literally dominated the local stock market in 2020.

“In the four months from March (when the government started implementing the Motion Control Order) to July, we saw more than RM 50 billion in turnover, whose combined market capitalization more than tripled from RM 44.43 billion to 28 February to 140 RM. 22 billion

“Note that the addition of RM 95.79 billion was short-lived,” said Datuk Nazri Khan, chief executive of Inter-Pacific Asset Management Sdn Bhd.

He said that both “Hartalega” and “Top Glove” surpassed IHH Healthcare Bhd in terms of market capitalization and that in the upper period the shares of the bracelets lag behind the price-earnings ratio of 12 months, between 51 times and over 100 times – among the highest are Hartalega 128 times and Supermax 100 times.

He said the top four bracelet makers, namely Top Glove, Hartalega, Kosan Guma and Supermax, had a transaction value of more than RM 40 billion – 13.5 per cent of all transactions through the Composite Index index. at FTSE Bursa Malaysia, Kuala Lumpur (FBMKLCI).

Looking at the bullish performance, some analysts described the sector as an “insurance policy” for the local stock market.

“Apart from healthcare companies and rubber gloves, the only other business sector this year is technology,” hence asset managers do not have many options to go, but to maneuver around sectors that only work.

MIDF Research, which recently upgraded its glove sector rating to “positive” from “neutral”, said the market capitalization of Supermax and Kossan Rubber remained above the RM 20 billion mark.

In fact, Supermax was added to the FBM KLCI stock index after a semi-annual review of the FTSE Bursa Malaysia Index Series on December 3.

Top glove “the busiest” of them all

Top Glove, which commands a 26 percent share of the global rubber glove market, with a production capacity of 80.2 billion units per year, saw its shares grow by more than 400 percent.

Its share price enjoyed a meteoric rise to 26.24 R from 1.55 R RM on January 2, 2020. Carried out the division of shares on September 7, 2020, and the shares are now moving around 6.60 M.

It also recorded its best quarterly net profit of RM 1.29 billion in the fourth quarter, ended 31 August 2020 (4QFY20), which is almost 18 times more than the RM 74.17 million it reported in the same quarter last year. year.

The net profit for its financial year ended 31 August 2020 was RM 1.86 billion, which is 417 percent higher than last year. Revenue rose to RM 7.23 billion from RM 4.8 billion last year.

In addition to Malaysia, Top Glove has production facilities in Thailand, Vietnam and China. Exports to over 2,000 customers in 195 countries worldwide. The export value of rubber bracelets is growing by 9.4 percent at a solid 10-year annual growth rate amid increased demand.

The top glove has also been listed on the Singapore Stock Exchange since 2016.

In addition to “Top Glove” and other big boys, companies with rubber bracelets with small caps also showed the financial results of sterling.

Prohibition of viruses in dormitories and probes

When Malaysia imposed a blockade in March to prevent the spread of Covid-19, rubber wristband manufacturers were allowed to operate at only half their capacity, resulting in a shortage of production and fears that they would not be able to meet global demand. .

However, this was resolved when the Malaysian Association of Rubber Glove Manufacturers (Margma) got involved to help with the arrangement.

It was perhaps the smallest of the many challenges the industry faced during the year.

The ban on Top Glow subsidiaries – Top Glove Sdn Bhd and TG Medical Sdn Bhd – by the United States Customs and Border Protection (CBD) in July over concerns about “forced labor” caused the company great damage by a drop in the price of shares up 10 percent to 19.70 yen on July 16.

On the same day, vaccine hopes and subsequent knee reactions led to the destruction of the total market capitalization of RM 10.5 billion from four counters, namely Top Glove, Hartalega, Supermax and Kosan Guma.

And while the largest bracelet manufacturer sweated it to solve the ban problem, more than 4,000 of its workers were infected with Covid-19, making it the largest contributor to Malaysia’s Covid-19 case with a cluster called Teratai. ”

Top Glove received a slap in the face for possible charges of alleged misconduct under the Jobs Act for Minimum Standards for Housing and Comfort (Law 446).

The manufacturer had to close its factories in stages to carry out projections of Covid-19, while the Order for Enhanced Traffic Control introduced in the Workers’ Dormitory was extended until 14 December.

It was reported that Top 20 Glove plants were temporarily closed with eight production lines still operating in Klang, reducing its production by between 10 and 20 percent.

The company expects revenue for the current financial year ending August 31, 2021, to be affected by three percent after the temporary cessation of production capacity in Klang.

Despite all this, the research houses maintained their status as “Top Glove” because it was the key user of the demand for rubber gloves globally.

On the other hand, this year it was also seen that the American CBP relaxed and lifted the ban on WRP Asia Pacific Sdn Bhd to help meet the demand for medical rubber gloves. This was after the Sepang-based company also faced a backlash from the United States, which claimed the company had used forced labor in its operations.

Vaccine and 2021

Despite these obstacles, the industry is expected to expand its bullish sentiment in line with the distribution of the Covid-19 vaccine, which should increase demand for rubber gloves to 18 billion pieces a year, given that 60 percent of the world’s population of 7, 5 billion people would receive the vaccine in two doses a year.

Malaysia’s market share is expected to improve to 68 percent when the country supplies 280 billion pieces of rubber gloves next year (compared to 410 billion pieces of world demand) from a 67 percent market share in 2020 (360 billion pieces of world demand).

It is estimated that the contribution of new players (such as Chandelier and Mach Singh) to the total number of Malaysians will be only about five to seven billion gloves in 2021 and 10 to 12 billion gloves in 2022.

“However, the biggest growth in the bracelet industry in 2021 and 2022 will be mainly due to the existing 57 manufacturers, who will be able to do so due to their continuous planned expansion from year to year in the last 15 years,” said the president of Marga, Dr. Supramaniam Shanmugam.

The association is also optimistic that Top Glove will resolve all ongoing issues and return to normal production soon, he said.

“In the meantime, the impact on the industry will be small as the shortage can be reduced with the newly expanded capacity of other existing players in the industry,” he added.

Margma forecasts industry revenue of RM 32.2 billion this year, up from RM 19.8 billion recorded in 2019. By 2021, revenues could range between RM 36 billion and Rs 38 billion, as a result of huge demand, regardless of whether the vaccine comes into play.

Islam Malaysia Bhd economist Adam Mohammed Rahim is also positive about industry performance as demand continues to grow in 2022 as health and personal hygiene awareness is likely to remain widespread as society generally accepts the new normal.

“Therefore, the demand for personal protective equipment, including gloves, will help demand post-Covid-19. Expansion plans for the big rubber bracelet manufacturers are on track for now.

For example, Hartalega remains focused on its capacity expansion plans. By the end of October 2020, Factory 6 has fully commissioned all 12 production lines and Factory 7 is expected to start operating by the fourth quarter of 2020.

Overall, his plan to increase annual installed capacity from the current 41 billion to 44 billion pieces by 2022 remains intact.

“Therefore, we expect an increase in average sales prices in the coming quarters,” he said.

As obstacles and challenges continue, the industry is without a doubt in another wonderful year in 2021 – Bernama


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