The Health September 2021 | Page 10

10

THE HEALTH | SEPTEMBER , 2021

| Cover Story |

valuation multiples of the rubber glove sector .
Gaining momentum
Echoing that , Fortress Capital Asset Management CEO Thomas Yong had told The Edge there was no longer any acute demand for gloves . This is because vaccination rates in advanced countries such as the US and Europe , the main revenue contributors to Malaysian glove companies , have picked up pace . The number of active cases has dropped . Thus , only a moderate demand is seen for gloves .
Philip Capital Sdn Bhd Chief Investment Officer Ang Kok Heng noted the glove sector ASP was coming down as more players entered the market . Ang expects glove makers ’ profits and share prices to normalise to pre-pandemic levels after one to two years .
However , with the recent resurgence in Covid-19 cases globally due to the spread of the more contagious Delta variant , glove stocks have started to gain momentum again .
The Delta variant , first identified in India , has shown to be airborne , more transmissible and can spread in five seconds . It can cause more severe sickness . This mutated variant has caused countries
around the world to reimpose new lockdowns .
AmInvestment Bank Research in a sector update opined the rising Delta cases might prompt glove counters to react optimistically in the short term . It would also slow the fall in glove ASP as glove urgency is buoyed by the rise in cases .
The research house added that the lower rate of fall in ASP would help support earnings in the next 12 months . In addition , it also expects the glove ASP to stabilise at US $ 30-35 / 1,000 pieces before tapering off far more gradually , moving forward .
Going forward , would the share prices of glove stocks rebound , and would the glove tycoons be able to increase their wealth again in the coming months ? — The Health
ASP will decline on a gradual basis . Nevertheless , Kossan expects its results for the remaining quarters of 2021 to be satisfactory as its glove capacity had been fully taken up until the end of 2021 while still receiving orders for 2022 .
Despite an upward trend in its revenue and net profit , its share price slumped by 58 per cent to RM3.16 / share as of Aug 17 . As a result , the value of Lim ’ s shares fell by 59 per cent and are worth RM3.8 billion .
Kossan , founded by Lim , is one of the largest manufacturers of disposable latex gloves globally , with an annual production capacity of 28 billion pieces . It is also Malaysia ’ s largest technical rubber products manufacturer , with a total compounding capacity exceeding 10,000 metric tonnes .
Comfort Gloves Berhad
Executive Chairman Datuk Lau Eng Guang
JUST like the other gloves tycoons , Comfort Gloves Executive Chairman Datuk Lau Eng Guang lost 44 per cent or RM229 million as the company ’ s share price fell 64 per cent to RM1.79 / share as of Aug 17 from a 52- week high of RM4.94 / share .
Lau ’ s 163 million shares in Comfort Gloves are now worth RM291.3 million .
As for its financials , the company has been recording stellar performances . For its Q3FY2021 ended Oct 30 , 2020 , it recorded its highest-ever net profit ( as of October 2020 ) at RM90.3 million , up 1,119 per cent from RM7.4 million compared to the same period a year ago due to higher sales volume and ASP . Comfort Gloves continued to break its record in 2021 when its net profit surged by a whopping 1,246 per cent to a record of RM137.87
million in Q4FY2021 ended Jan 30 , 2021 , compared to RM10.24 million in Q4FY2020 .
Meanwhile , in its first quarter of FY2022 ended April 30 , 2021 , the company posted its highest-ever quarterly net profit of RM219.13 million , an increase of 1,241 per cent from RM16.34 million a year ago . This was due to higher sales volume with a significant higher ASP and better economies of scale .
The company can produce 6.8 billion gloves per annum with its existing capacity .
According to the glove maker , four double former dipping lines were commissioned entirely during the quarter under review . In addition , Comfort Gloves plans to authorise an additional seven double former dipping lines , which are expected to be completed towards the end of FY2022 ( Jan 31 , 2022 ).
With all the completed production facilities , Comfort Gloves will produce up to 8.6 billion gloves .
Rubberex Corporation ( M ) Berhad
Major shareholder Datuk Ong Choo Meng
DATUK Ong Choo Meng emerged as a substantial shareholder of Rubberex Corporation on Feb 28 , 2020 , after he bought a 26.69 per cent stake or 67.31 million shares in the company , following the execution of a share sale agreement ( SSA ).
Before the pandemic , Rubberex ’ s share price was hovering below 20 sen and surged to hit a 52-week high of RM3.05 / share . Subsequently , Ong who has been increasing his shareholding in the company saw the value of his 148.27 million shares in Rubberex expand to
RM1.36 billion ( which includes a two-forone bonus issue in October 2020 ).
It is noted that Ong held 50.27 per cent of Rubberex ’ s shares through Hextar Rubber Sdn Bhd at the end of last year before disposing of 107 million shares in April .
As the share price plummeted 73.8 per cent to 80 sen / share as of Aug 17 , Ong – who currently owns 309.95 million or 37.24 per cent stake in the small cap glove maker held through Hextar Rubber – lost 81.72 per cent or RM1.11 billion to RM247.96 million .
In its Q3FY2020 ended Sept 30 , 2020 , the glove maker ’ s net profit rose more than 11 times to RM39.52 million compared to RM3.11 million a year ago due to higher demand for nitrile gloves , higher ASP , favourable exchange rates and improved production efficiencies .
Ong is the Non-Independent Executive Director for Hextar Global Bhd and SCH Group Berhad ( formerly Hextar Industries Berhad ). He is also the major shareholder of SWS Capital Berhad .
In its immediate pipeline , the company is installing additional production lines capable of producing up to 7.5 billion pieces of disposable nitrile gloves per annum by 2022 , representing a significant 300 per cent boost from its current 2.5 billion pieces to 10 billion pieces .
In addition , the producer of household and industrial rubber gloves is also poised for expansion later this year at its new 11.9-acre manufacturing site located in Lahat , Kinta District , Perak .
Careplus Group Berhad
Group CEO and Executive Director Lim Kwee Shyan
HAVING 134.92 million of Careplus Group shares in hand priced at RM4.44 / share ( 52-week high ) during its peak , its Group CEO and Executive Director Lim Kwee Shyan ’ s wealth stood at RM600 million .
In its Q3FY2020 ended Sept 30 , 2020 , Careplus reported a strong set of financial results as its profitability returned to the black to RM42.86 million from a loss of RM4.94 million in Q3FY2019 , thanks to an increase in the ASP from the surge in demand due to the Covid-19 pandemic and higher sales quantity .
Careplus continued to record good financial growth for two quarters consecutively in Q4FY2020 and Q1FY2021 with net profits of RM42.3 million Q4FY2019 : RM783,000 and RM123.54 million ( Q1FY2020 : RM1.14 million ) respectively .
Despite logging a higher net profit of RM105.08 million in its latest Q2FY2021 ended Jun 30 , 2021 , compared to RM36.21 million a year ago , Careplus ’ net profit declined 17.6 per cent from RM123.54 million in the preceding quarter ( Q1FY2021 ).
The glovemaker attributed the drop in net profit ( compared to the previous quarter ) to the lower ASP of rubber gloves coupled with higher costs .
As for its share price , it has dipped 61 per cent to RM1.70 / share as of Aug 17 . Thus , Lim ’ s shares in Careplus are now worth RM226.8 million , incurring a 62 per cent loss .
On its development plans , the installation of nine lines has been delayed to the end of 2021 due to the enhanced movement control order ( EMCO ) and recent factories shutdown . In addition , there will be another two lines installed by early 2022 .
Furthermore , another eight lines are being planned to be completed by the end of 2022 .
With this , Careplus is expected to have 55 production lines with an annual capacity of 10.06 billion pieces of medical and surgical gloves by the end of 2022 .