How valuable are glove stocks on Bursa?

KUALA LUMPUR (July 29): The market value of the top glove maker in Malaysia is now equivalent to a bank plus a plantation giant’s.

This is now the scenario in Bursa Malaysia as investors shovel billions of ringgit into glove manufacturers, which has resulted in the rapid ballooning of their market capitalisations (market caps).

At yesterday’s close, Hartalega Holdings Bhd overtook Public Bank Bhd to be the third largest company in Bursa Malaysia with a market cap of RM68.21 billion, after Malayan Banking Bhd’s (Maybank) RM88.02 billion and its peer Top Glove Corp Bhd’s RM71.22 billion.

In a nutshell, the market is valuing banking tycoon Tan Sri Dr Teh Hong Piow’s stake in Public Bank less than Tan Sri Dr Lim Wee Chai’s equity interest in Top Glove as well as Kuan Kam Hon’s shareholding in Hartalega.

Meanwhile, Supermax Corp Bhd is knocking at the door of the top 20 companies given that its market cap swelled to RM24.54 billion, followed by Kossan Rubber Industries Bhd at 22nd place with RM22.13 billion. The two are currently ahead of the likes of RHB Bank Bhd, Telekom Malaysia Bhd and Genting Bhd.

Year-to-date, Hartalega and Top Glove have gained 263% and 461% respectively. Supermax has soared 1,267% while Kossan has surged 316% so far this year.

All four companies closed at new record highs yesterday.

On top of the expected super profit boosted by higher sales and selling prices, the news flow on the Covid-19 pandemic is showing no real signs of easing globally. The rebound in new cases in Malaysia — 39 reported yesterday — also grabbed attention.

The four glove makers combined have a market cap of RM186.18 billion, as opposed to RM224.13 billion for Malaysia’s four largest banks — Maybank, Public Bank, CIMB Group Holdings Bhd and Hong Leong Bank Bhd.

To put things in perspective, ceteris paribus, with RM70 billion in hand, one could buy Top Glove or Hartalega, or to take over two companies — CIMB and Sime Darby Plantation Bhd. (see chart)

For Supermax or Kossan, each of their market caps is more than RHB Bank or Petronas Dagangan Bhd.

“What can you say? Previously banks had very heavy weightage on the KLCI as well. It is cyclical,” said an investment analyst.

“We are currently in a news-driven, sentiment-driven environment, where interest rates are low but both safe havens like gold and stocks are gaining in parallel. We are in unprecedented times,” he added.

However, he cautioned that glove manufacturing is not a super-high-tech business. “The market is always right. It will eventually find an equilibrium, so enjoy while it lasts.”

Source: TheEdgeMarkets