KUALA LUMPUR (Dec 18): The current situation of the rising Covid-19 cases has spurred investors’ buying interest in rubber glove counters of late, with Top Glove Corp Bhd being the most active counter in Monday's trade.
Data from the Ministry of Health showed that the number of Covid-19 cases in the country surged 62% to 20,696 between Dec 10 and 16, compared with 12,757 cases in the period from Dec 3 to 9. Since the virus emerged in 2020, Malaysia has seen a total of 5,141,797 total Covid-19 cases with 37,246 deaths.
The Bursa Malaysia’s Healthcare Index jumped to an 18-month high of 1,943.17 — up 3.21% from Friday’s (Dec 15) 1,882.75 — driven by gains in the glove counters. This is the highest since May 23, 2022 when the index stood at 1,979.12.
Shares of Top Glove Corp Bhd grew 26.25% from a recent low of 80 sen last week to reach an intraday high of RM1.01. At Monday’s closing bell, the counter pared its gains to 96 sen — up six sen or 6.67% — giving it a market capitalisation of RM7.88 billion.
The group’s trading volume more than doubled to 337.25 million, compared with Friday’s trading volume of 110.58 million, making it the most actively traded stock on Bursa. Top Glove, which has been in the red for five straight quarters, will release its first quarter financial results for the period ended Nov 30, 2023 (1QFY2024) on Wednesday.
The rally in Top Glove’s share price is attributed to investors’ anticipation of improved 1QFY2024 results, Rakuten Trade equity research vice president Thong Pak Leng told The Edge.
“But that won’t turn the tide and (make them) recover so quickly as well as bring them back to pre-Covid-19 levels of earnings. Additionally, China is rapidly catching up and undercutting the average selling prices (ASP),” he said.
To recap, Top Glove recorded its largest quarterly net loss of RM463.15 million for the fourth quarter ended Aug 31, 2023 (4QFY2023) — versus RM62.99 million net loss in 4QFY2022 — mainly due to goodwill impairment of RM138 million and impairment and write-off of property, plant and equipment of RM251 million.
Careplus Group Bhd, meanwhile, emerged as the second most active stock, with its trading volume at 213.73 million, more than seven times the 26.91 million recorded on Friday. Its shares climbed to an 11-month high of 46.5 sen — climbing 11.5 sen or 32.86% — valuing it at RM272.01 million.
Careplus, which received a nod from the Ministry of Investment, Trade and Industry (MITI) in October to manufacture and assemble energy efficient vehicles, saw its share price surge over 60% in the past month.
Hextar Healthcare Bhd’s (formerly known as Rubberex Corp (M) Bhd) share price grew 26.92% to 33 sen, translating into a market value of RM360.75 million. Trading volume of the stock — among the top 20 active stocks on Bursa — swelled 10-fold to 60.86 million from 5.93 million previously. In the past month, Hextar Healthcare’s share price has risen by over 37%.
Share prices of other rubber glove counters namely Hartalega Holdings Bhd inched up six sen or 2.23% to RM2.75 translating into a market capitalisation of RM9.43 billion while Supermax Corp Bhd expanded 9.78% to to RM1.01, valuing it at RM2.75 billion.
Kossan Rubber Industries Bhd grew 4.44% to RM1.88, which translates into a market value of RM4.81 billion.
Commenting on the rally of the rubber glove counters, Areca Capital Sdn Bhd CEO Danny Wong Teck Meng said rising Covid-19 cases and efforts by some glove operators to implement cost-cutting measures that led to better cost management have piqued investors’ interest.
“A gradual recovery of glove demand is expected for next year, though some believe (it will) not (be) immediately,” he told The Edge.
AmInvestment Bank Bhd, which has upgraded its rating for the sector to ‘hold’ from ‘underweight’ previously said there is a high possibility of demand recovery among local glove makers. The increased optimism for the sector is bolstered by the findings that China’s players will not materially increase their capacity in the near term, it said.
“All in, we adhere to our assumption of a meaningful inventory replenishment among Malaysia’s glove makers by 1QCY2024.
“We expect gradual quarter-on-quarter earnings or loss improvements among the three glove makers under our coverage — Hartalega, Top Glove and Kossan — despite lower ASP amid higher raw material prices, as this will be fully mitigated by economies of scale achieved from higher PU [plant utilisation rate] in 4QCY2024,” it said in a note dated Dec 12.