Affin Research has maintained its Overweight on the rubber gloves sector, naming Kossan as its top pick.
In a note on Friday, the research house said its positive view on the sector is backed by the low and stable latex cost, resilient demand from both developed and developing economies and improving production efficiencies.
It said Kossan saw earnings expand by a robust 39% on-year in 2013, to a new record high of RM141mil.
“Overall, we attribute the Big 4’s (Top Glove, Supermax, Kossan and Hartalega) healthy results to robust sales-volume growth backed by healthy capacity expansion, favourable raw material costs and an overall enhancement in operating efficiencies brought by managements’ initiatives in improving the automation process in their respective production facilities,” it said.
Affin said it expects demand to be resilient as it is deemed as a staple product within the healthcare industry.
“We gather from the Malaysia Rubber Glove Exports Council (MREPC) that global demand and consumption (barring any viral outbreak) will continue to grow by around 8% to 10% annually at least over the near term.
“Herein, we think that the assessment is realistic judging from the recent historical demand trend, spurred by rising healthcare reforms globally,” it said.
It said global population is increasingly becoming more hygiene conscious, and some have even set more stringent requirements on the quality of gloves used while others are encouraging more healthcare centres to use them.
“All in, we think that the global demand will continue to grow, in tandem with world population growth, and spurred along by an increase in usage at healthcare centres globally,” it said.
Source: The Star
Published: 07 Mar 2014