M&A ups Supermax earnings, TP after 9M profit beats forecast

by **Cals** Fri 29 Nov 2013, 18:26

Business & Markets 2013

Written by Jeffrey Tan of theedgemalaysia.com

Friday, 29 November 2013 12:26

KUALA LUMPUR (Nov 29): M&A Securities Sdn Bhd has upgraded its earnings forecast for Supermax Corp Bhd and raised its target price (TP) for shares of the rubber glove manufacturer.

This is in view of Supermax's better-than-expected performance for the nine months ended September 30, 2013 (9MFY13) and its upcoming business park, M&A said in a note today.

"FY13 and FY14 earnings have been adjusted higher by a 10% margin in view of the better-than-expected 9M13 performance.

"We derive a new target price of RM2.85 on Supermax and the stock is a "buy". Supermax’s upcoming business park should help the group ramp-up its production and in turn, its earnings growth," M&A said.

M&A's new TP for Supermax compares with RM2.54 previously.

M&A said Supermax's cumulative 9MFY13 net profit of RM103 million accounted for 72% and 84% of consensus and M&A's full-year net profit forecast.

According to M&A, the Supermax Business Park's 40ha (100 acre) land will be utilised to build an integrated glove manufacturing complex. This is part of the group’s long-term expansion plan.

M&A said 60% of the buildable land will be used for Supermax’s nitrile glove plants as demand for nitrile gloves is rapidly rising.

The remainder of the land will be offered to glove-supporting industries such as chemical and packaging suppliers, besides engineering and automation companies.

M&A said Supermax’s two new plants will commence production gradually between this year end and early first quarter of next year.

This will increase nitrile glove production capacity to 12.3 billion pieces a year from 6.9 billion pieces.

"The expansion plans are not a surprise as it is in line with the group’s plan to boost production capacity as glove demand remains resilient and healthcare awareness is rising globally," M&A said.