KUALA LUMPUR (August 15): Hartalega Holdings Bhd slipped below RM2 on Monday (August 15) after falling 15 sen or 7.5% to RM1.85 while rival glove maker Kossan Rubber Industries Bhd rose above RM1 at its intraday low at 97 sen as investors gauged the post-Covid-19 business outlook for rubber glove makers who saw increased sales during the crucial phase of the outbreak, which began in beginning of 2020.
The last time Hartalega fell below RM2 was April 28, 2017 when it saw RM1.99, while the last time Kossan fell below RM1 was March 6, 2015 when he saw 99 sen – according to Bloomberg The data.
Hartalega, which ended the day at RM1.86 – down 67.54% year-to-date (YTD) – saw 50.57 million shares traded, ranking the stock seventh among the main assets of Bursa Malaysia. The counter was also fourth on Bursa’s list of top losers.
Last Tuesday (August 9), Hartalega saw its net profit for the first quarter ended June 30, 2022 (1QFY23) slump to RM88.28 million from RM2.26 billion a year earlier, revenue from rubber glove maker that dropped significantly as the average selling price. (ASP) and glove sales volume declined after hitting an all-time high during the Covid-19 outbreak.
Additionally, the Employees Provident Fund sold 5.09 million shares to Hartalega last Wednesday (August 10), reducing its stake to 6.667%, according to its Monday stock market filing.
Meanwhile, Kossan closed at 98.5 sen on Monday after falling 9.34% or 10 sen earlier in the day to 97 sen from its previous closing price of RM1.07. The counter was ranked sixth on Bursa’s most active list. Year-to-date, Kossan has fallen 48.7%.
EPF currently holds a 5.59% stake in Kossan, according to its Aug. 12 filing.
As for their other two peers, Top Glove Corp Bhd settled six sen or 7.02% lower at 79.5 sen after the counter traded between 77 sen and 87 sen, while Supermax Corp Bhd settled three sen or 3.82% lower to 75.5 sen after the share trade. between 75 sen and 79 sen.
Hartalega, Kossan, Top Glove and Supermax are part of the Bursa Health Index.
Meanwhile, Top Glove and Hartalega are also members of FBM KLCI.
The benchmark FBM KLCI index ended the day down 2.18 points or 0.14% at 1,504.01 while the Health gauge fell 34.49 points or 2.15% at 1,572.95. .
The Healthcare Gauge, which also tracks stock prices of pharmaceutical companies and hospital operators, was the biggest percentage decline among Bursa’s 30 indices.
Seek Clarity Before Investing in Glove Stocks, Glove Analysts Say
Earlier this month, on August 3, the Malaysian Rubber Glove Manufacturers Association (Margma) said global demand for rubber gloves is expected to return to growth in 2023, after contracting 19% to reach about 399 billion coins this year, compared to 492 billion in 2021. when the world was at the height of the Covid-19 pandemic.
Meanwhile, theedgemarkets.com Last Friday (August 12), reported that a total of RM31.18 billion in market capitalization had been wiped out by seven glove makers in Bursa since the start of the year.
Subsequently, glove analysts said theedgemarkets.com Monday that investors should seek clarity in addition to applying a wait-and-see approach if they decide to invest in glove stocks in the current market environment.
BIMB Securities analyst Nursuhaiza Hashim sees no emerging value for glove players as the outlook for the industry remains bleak.
She believes that the imbalance between supply and demand in the glove industry may take longer than expected to normalize given the intense competition resulting from a surplus market, leading to a further decline in the ASP.
“Furthermore, we are seeing an insignificant recovery in order volume. Utilization rates of the big four players are now below 70%. On top of that, shipping vessel constraints and labor shortages persist.
“Year-to-date, the stock price of the top four glove players is down around 48% to 69%. We don’t rule out that there may be further selling pressure for the glove counters.
“So I think it’s best for investors to take a wait-and-see approach to the glove industry,” she said.
KAF Equities analyst Nabil Fikri Zainoodin observed that the market has priced in the possibility of loss-making quarters ahead for glove makers, with earnings recovery only expected in FY23.
“However, we still consider the risks to be on the downside. There is currently extremely limited visibility on how long it will take before supply and demand dynamics reach equilibrium,” did he declare.
Given the current oversupply situation, Nabil anticipates an extended period of low ASP and low plant utilization rates.
This is on top of rising input costs and structural changes in the glove industry, such as higher social compliance standards as well as more countries now working towards self-sufficiency in production. of gloves, as there could be a significant drop in acceptable profit margins.
“Therefore, we believe it may take some time for earnings to return to pre-pandemic levels. Given these risks, we advise investors to wait for more clarity to emerge,” he said. added Nabil.
Market cap of RM31 billion has been wiped out of seven glove stocks since January