MALAYSIA: Robust demand for Malaysia’s nitrile gloves
Malaysia’s glove sector could see strong earnings growth over the next two years, according to Maybank Investment Bank Research.
The research house said this was a result of market share gains, on top of the organic global demand growth.
Maybank noted that the year-to-date demand for Malaysia’s nitrile gloves was robust, a result of capacity growth in Malaysia and lower supply of vinyl gloves from China.
“We note that several coal-based vinyl glove factories were forced to shut down in early-2017 due to the environmental pollution issues,” it said.
In 1Q17, Malaysia’s glove export volume jumped 19% year-on-year, significantly higher than global glove demand growth of 6% per annum.
“Hence, we believe Malaysia has gained market share year-to-date (2016: 63% of global market share), potentially at the expense of China’s manufacturers,” it added.
Based on the expansion plans of key glove players, Maybank opined the new capacity in 2017 can be absorbed by the new demand.
“However, for 2018, capacity growth of about 15.5 billion pieces per annum could outstrip that of demand about 12 billion pieces per annum but just slightly if we adjust for timing for new onboard capacity and utilisation rates,” Maybank said.
“Given the strong nitrile glove sales, we have raised Hartalega’s earnings per share (EPS) by 11% per annum for FY18-19. We maintain earnings forecasts for Top Glove and Kossan.
“We now project stocks under our universe to post 2-year (2016- 18) EPS CAGR of 18%, with Hartalega leading the pack at 28%, followed by Kossan (22%) and Top Glove (5%),” Maybank said.
Source: Daily “The Star”, Kuala Lumpur; 6 July 2017
(Syed Rashid Ali, Karachi, Pakistan)