Signs point to privatisation for Adventa (7191)

PETALING JAYA: A privatisation could be on the cards for glovemaker Adventa Bhd as its valuations are cheap amidst an improving outlook in the glove sector, according to analysts.

The company yesterday suspended trading in its securities for three days from Friday to Tuesday “pending a material announcement to be released by the company.”

An industry observer speculated that the company could be privatised by its largest shareholder and CEO Low Chin Guan, who currently owns 38.5% of the company, according to Bloomberg data.

Behind Low is Lembaga Tabung Haji with a 9.38% stake, while his sister Low Lea Kwan is third with 2.95%.

When asked about the possibility of larger glovemakers taking over Adventa, which has a market capitalisation RM246mil, the observer told StarBizWeek that they had not earlier indicated any such interest.

Kenanga Research recently upgraded the rubber glove sector to “overweight” from “neutral,” citing the strengthening of the US dollar against the ringgit as well as falling latex prices.

“We reckon glove companies' earnings could see an upside bias ahead and lead to a re-rating for glove stocks in the third quarter of 2012,” it said in a client note dated June 27.

Adventa is principally involved in manufacturing surgical and examination gloves and medical devices, together with the distribution of medical products for the healthcare industry.

The volume of trading in its shares almost tripled to 246,500 on Thursday from 86,500 a day earlier, with the last done price up 8% to RM1.61.

Its estimated price-to-earnings ratio for the financial year ended Oct 31, 2012 is 12.38 times according to Bloomberg, while price-to-book is 0.3 times based on its net asset per share of RM4.02 as at end-April.

The firm reported a net profit of RM6.15mil in its second quarter ended April 30, an increase of 36% from RM4.59mil last year. Revenue was 2.23% higher at RM106.63mil versus RM104.3mil.

Its earnings in the first half were weaker than expected due to a fire that gutted its storage facilities in the first quarter, resulting in an estimated loss of RM2.12mil in fixed assets, while goods damaged amounted to RM4.61mil. Both were written off as losses.

The incident also led to constraints in storing raw materials and finished products, which in turn adversely affected the production of examination gloves.

OSK Research said in a note to clients last week that Adventa stood out for producing one of the highest-end surgical gloves targeted at niche markets in the United States, Europe and Japan region.

“We believe the company's only setback is its lack of economies of scale versus its peers, which has not enabled it to enjoy much lower unit cost per glove,” the brokerage said.

Trading in Adventa suspended for 3 days (7191)
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