Rubber Safety gloves | M A D A Y S We A
HEALTHCARE & DRUGS
NOMURA SECURITIES MALAYSIA SDN BHD
Jacinda Loh Wai Kee Choong
+60 three or more 2027 6889 +60 three or more 2027 6893
A D C L O Ur
R Elizabeth P O R To
Another good stretch out
Even after having a good manage for Malaysian rubber glove stocks within the last 12 months, we think valuations are far from worked out, at FY11F P/Es of seven. 8-11. 6x, or 20-46% below the market's P/E of 14. 5x. While most corporations should see a breather after 40-50% EPS growth in 2009 spurred by simply pandemic concerns, we expect a leg-up in structural demand development, fuelled by recovery in the global overall economy, to support 9-26% EPS CAGRs over the up coming three years. With this growth history, P/Es of 7. 8-11. 6x for FY11F look compelling against the Malaysian market and also other companies upon Nomura's GET list. Malaysian players control 60-65% of worldwide capacity and see three- to fivemonth backlogs and high latex prices driving a car higher ASPs in 2010F. Sizeable long lasting potential is present in the generally untapped Asian markets, which make up just 6-10% of global revenue, while worries on potential industry overcapacity in 2011F seem unwanted given the global economic recovery and potential restrictions in natural gas supply. We trigger coverage on the top Glove, Kossan and Supermax, the three largest listed glove makers in the world, with GET ratings. Our top pick is Top rated Glove, whose diversified global customer base should support stable margins and for which we forecast a three-year EPS CAGR of 25. 7%, implying an FY11F P/E of 11. 6x.
Shares for action
Each of our top decide on is Leading Glove provided its regular track record in delivering development and ongoing market command. We are likewise positive through the sector. Cost Price concentrate on Rating (RM) (RM) BUY* 11. 98 BUY* BUY* 6. 16 7. 32 15. 16 8. 74 9. fifty-one
Stock Top Glove (TOPG MK) Supermax (SUCB MK) Kossan Rubberized Industries (KRI MK)
2. Initiating insurance coverage; prices while at five March close
A strong yr ahead Too early to worry about industry glut Malaysia вЂ” the largest glove maker in the world P/Es still low for progress, Top Glove is the top pick Nomura Core Reports examine the key themes and benefit drivers that underpin the sector views and inventory recommendations for the next 6 to 12 months.
Any authors called on this survey are exploration analysts except if otherwise mentioned. See the important disclosures and analyst certifications on pages 48 to 52. Nomura 10 Drive 2010
Plastic Gloves | M A L A Y S i9000 I A
H Electronic AL T H C AR Electronic & S H KVADRATMETER M AIR CONDITIONING UNIT E U TI C AL T
NOMURA INVESTMENTS MALAYSIA SDN BHD
Jacinda Loh Wai Kee Choong
+60 3 2027 6889 +60 a few 2027 6893
Action Inspite of soaring an average of 300% (vs the market's 48% rise), leading plastic glove stocks and options still imply 25-40% upside, in our look at. The risks of overcapacity and margin press are improbable to happen in the next 12 months. Attractive valuations of up to a 46% price cut to market PRICE TO EARNINGS, coupled with solid earnings development prospects above the next several quarters, support our investment calls. Factors Latent demand from China, India and feasible US health care reform stay potential re-rating catalysts. Point Themes With no imminent hazards, the glove sector appears set to gain from another yr of solid growth. Companies with experience of faster-growing markets, diversified income bases and efficient price structures happen to be our top rated picks.
Stocks for action
The top opt for is Top Glove, offered its consistent track record in delivering development and industry leadership. Our company is also positive across the sector.
Stock Top rated Glove (TOPG MK) Supermax (SUCB MK) Kossan Plastic Industries (KRI MK)
Price Price (RM) target 15. of sixteen 8. seventy four 9. 51
BUY* 11. 98 BUY* BUY* six. 16 several. 38
2. Initiating protection
Prices while at a few March, 2010....