Better days for rubber glove sector

KUALA LUMPUR: The worst is over for the rubber gloves industry whether a H5N1 bird flu pandemic is declared or not, said OSK Research Sdn Bhd.
In
a research note today, OSK said, should the virus continue to spread,
it would be positive for the sector, just like in 2009 when the
influenza A (H1N1) virus was declared a pandemic.
“During the
2009 H1N1 pandemic, all the share prices of rubber glove stocks rallied
due to their consistent quarters of earnings improvement,” it said.
[You must be registered and logged in to see this image.] Suited
up for 2012: Rubber medical gloves being produced at Latexx Partners
plant in Kamunting Industrial Estate. OSK remains positive on the rubber
glove sector for this financial year even without a healthcare
pandemic.
It said compared with 2009/2010, competition had lessened, which would augur well for the sector's earnings.
OSK said latex price, which made up 60%-70% of glove makers' total cost, had retraced to RM6.50 per kg from a high of RM11.
“The
main reasons for the drop include a slowdown in the car sector as tyre
used up about 70% of global natural rubber, less speculation on the
commodities, including latex, and the recent Thai floods not affecting
the country's plantations,” it said.
OSK said it remained
positive on the sector for financial year 2012 even without a healthcare
pandemic and would maintain its “overweight” call.
“We continue
to see most rubber glove stocks as defensive stocks now since their
share prices have retraced quite significantly from their highs towards
the end of the H1N1 pandemic in the first half of 2010,” it said.
It said Supermax Corp Bhd
remained its top sector pick. “Its earnings are more sustainable as the
firm derives secondary income from its distribution business.” -
Bernama