Bright outlook for glove sector

by **Cals** Thu 21 Mar 2013, 10:45

Bright outlook for glove sector
Business & Markets 2013
Written by Fatin Rasyiqah Mustaza of theedgemalaysia.com
Thursday, 21 March 2013 10:18

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KUALA LUMPUR: The rubber glove sector has been given an “overweight” rating by two research houses as the sector has shown positive earnings for its current quarter, which was in line with analysts’ expectations.

The sector’s good financial results were achieved through stable latex cost and a pick-up in demand, despite the impact of the minimum wage policy introduced early this year.

According to Alliance Research, three out of four glove makers under its coverage met its expectations for 2012’s fourth quarter period. KOSSAN RUBBER INDUSTRIES BHD [] registered the highest sales volume growth, followed by HARTALEGA HOLDINGS BHD [] and Top Glove Corp Bhd.
The exception is Supermax Corp Bhd, which missed the target by 5%.

“In 2012, the top four glovemakers achieved a total volume growth of 20%, outperforming Malaysia’s total export volume growth of 15%,” said Alliance in a report.
The research house foresees Malaysian glove makers will remain competitive globally while continuing to lead the global glove market, underpinned by better production TECHNOLOGY [] and weaker ringgit against competitors’ currency.

“We view the glove sector as a safe haven for investors in the run-up to the 13th general election, as it is an industry that is least affected by the election due to its export-oriented business,” said the research house.

Meanwhile, BIMB Securities Research said in a report the impact of the minimum wage rate has already been felt in Top Glove’s recent financial quarter, which led to lower quarter-on-quarter earnings.

“We expect the same for the other players in 2013. We believe Hartalega will be the least affected given its highest level of automation and lowest number of labour among our big glove players,” BIMB said.

According to the research house, the price of latex has stabalised to between RM6 and RM6.20 per kg over the past two months. It believes that the price should stay around this range for the next few months.

Both research houses maintain their “overweight” call on the rubber glove sector, with Kossan as their top pick.

This article first appeared in The Edge Financial Daily, on March 21, 2013.