Rough Ride Ahead For Rubber Glove Makers?

Rubber prices climbed to a record high on last week, putting more pressure on the margins of rubber glove manufacturers, which are already grappling with oversupply and normalising demand issues. 

May 2011 delivery contract for the commodity traded on the Tokyo Commodity Exchange rose to RM15.48 per kg on last week. Tyre-grade SMR 20 rubber traded in Malaysia rose to RM14.81 per kg while the price of latex increased to RM9.79 per kg.

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Should Investors Exit Malaysia Glove Makers?

Malaysian rubber glove makers are getting used to a slower life after years of scorching growth as demand drops, latex prices soar and the dollar weakens. World’s No.1 glove exporter Top Glove recently said it expects to grow at a meagre 10 per cent in 2011, a far cry from the 50 per cent growth rate it has seen in the last two years.

Shares of Top Glove and its Malaysian peers such as Supermax Corp and Kossan Rubber, have dropped more than 20 per cent since touching all-time highs in July. Same question, will a rising ringgit and high latex prices continue to depress the stocks, or are the low prices a good entry point into the sector?

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Rubber Glove Makers Revived

Let's just face the reality. After so many bloggers and other analysts boast about the attractive price of rubber glove makers recently, they just won't be as influence and effective than CIMB Research house and Terence Wong promoting about it.

Rubber glove markers finally advanced altogether right after CIMB Research house maintained the rating for this sector despite influence by the negative impacts in this afternoon. Terence mentioned that the gloves demand will still continue to grow at a healthy clip for the time being. In addition, he also stated rubber glove makers from Malaysia would maintain its leadership in the global market.

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Sunrise or Sunset of Rubber Glove Stocks Part 2

Aduh, the entire rubber glove makers' prices are continue to drop like nobody, including the leader. Overall, they have dropped around 23 to 38%. Harta has the strongest resistant so far, where share price only fallen around 23%, where Latexx and Supermx have fall 38% respectively.

The selling pressure continues after our hot topic discussion, and even worst on yesterday, thanks to OSK Investment downgraded from overweight to neutral, neutral call for Topglov, as well as Ringgit continues to strengthen up to RM3.09 today, the highest since the previous Asian crisis. And yet, still no buy back action from management.

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Sunrise or Sunset for Rubber Glove Stocks?

Hi folks, I hope you are doing well in your stock contest so far?

As per discussion on Rubber Glove stocks in my previous post, they are expectedly to continue to face selling pressure this week, after a reversed bullish day on 9th Sept. Their prices are continue to drop due to the further strengthen of Ringgit against US dollars. Apart from that, latex price remain at high level of RM700. Compare to previous month, the latex price has slightly went down.This is a good sign. On the other hand, Ringgit has no sign of weakening for the time being, as Bank Negara will continue to hike the interest rate while US economy is still at the bottom of recovering. This could be short to mid term.

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Supermx

I believe you have already know Supermx has made 40 times net profit and EPS than the previous year quarter. What an outperform company! It's outstanding financial result is outshine it's peers and become the attention of investors. Well, if you aware about it, I've been reiterated mentioning  this gem since the beginning of my blog.

From the statistics, it's production volumes have dropped 5% compare to previous quarter, but surprisingly it still managed to make more profits. Well, it shouldn't be surprising because we can understand that the glove price has been adjusted due to the high demand.

Supermax management team, led by Dato Seri Stanley Thai (left hand with spec).

For the 2Q10 outlook, Supermx will continue to outshine under rubber glove industry, because of the followings:

1) Higher demand volume as H1N1 seems yet to be over.

2) Strong volume orders received for Q2, indicating higher future revenue.

3) Capacity expansion is on track, with the ability to increase annual capacity of 20%.

4) Opening new subsidiary in Germany, with 90% share owned, indicating more orders to come for Euro market.

5) Improving management and operation efficiency.

On the other hand, Latex price has shot back to the peak price recently, due to high demand from rubber glove makers. We know the industry peak season will eventually over, perhaps next year or later. Perhaps you would like to reap some profits now, before it comes to the end.

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The End of Bullish for Glove & Steel?

Wow, look at what the market done to rubber glove and steel manufacturer companies today. The strong sellers dominated them! As I've told you before, the buyers are already all in, it is seriously lack of buyers already. From the traded volume, I suspected there were few big players taking profit bit by bit and insanely push down the price.

Fair enough, they have bullish for many days, especially rubber glove makers, adding that analysts already warned there will be profit taking on rubber glove shares. According to price action, rubber glove stocks might be facing correction for the coming few days. Steel industry might be able to bull again on next week.

Just to let you know that I'm still holding still holding Harta, Supermx and Lionind. I have suffered huge unrealized profit vapored from my trading account on yesterday. I did not take profit for any of them, because I believe it is just a normal correction and they will definitely bullish again after next 2 weeks. You should know their 4Q09 results will be out in February right?

To be honest, one of the main reasons I don't take profit is, I don't have time to monitor the market to allow me to in and out at the right timing. Since I have confident on these 2 sectos future bullish, just let it be for now. I will look into more strong growth stocks to invest.

Happy trading.

Glove Makers

Have you feel the strong growth of glove makers?

Yes, the glove marker companies are just too strong and their bullish are never-ending since early of this year. You may notice their quarterly financial result and this year financial result are totally beyond expectation. Thanks to H1N1-driven of the high demand from the globe.

Well, if you would like to look into which has the best potential to grow in terms of profit and share price, try look at Hartalega and Supermx.

Hartalega is the most efficient, lowest production cost and fastest growth in terms of capacity and profit among all the glove makers in Malaysia. Imagine it just listed on 2008 and it can shoot up to RM5.40 in just 2 years time. Definitely this company can run higher with it's best fit situation.

For Supermx, it is a good buy because it has settled it's most serious problem, debts. And now it can fully concentrate on increase capacity with new plant and production lines, efficiency in terms of production, and lower the production costs. Apparently it has started to increase efficiency and lower the production costs practice since early of this year. And it's share price as been risen from the bottom of RM2.45 to RM3.50. If not due to the retreat of the Lembaga Tabung Haji, it's stock price has already maintain above RM4.00. We will see how this stock soars very soon.

I believe H1N1 will still continue on 2010, and the glove demand is still there. So let's anticipate this 2 strong growth companies share price to shoot up to RM6.30 within 4Q09 and 1Q10. Well, they are just my personal research and findings, as there are no guarantee to win in stock market. But we have a higher probability here with the correct strategy to invest.

Happy investing.