Rally still intact, analyst says after glove counters decline for two days

KUALA LUMPUR (Aug 10): Glove counters fell sharply again today after Friday’s losses, raising the question of whether the rally fueled by soaring glove demand since the start of the Covid-19 pandemic is over.

Not so, said an analyst who believes the rally is still intact. But he thinks retailers’ expectations on the glove makers’ earnings exceed actual earnings.

He cited the case of Hartalega Holdings Bhd, which a week ago announced a record-breaking quarterly net profit of RM219.72 million for its first financial quarter ended June 30.

However, the excellent results fell short of analysts’ expectations, and today marks five consecutive trading days that Hartalega shares did not close higher. The counter has fallen every day, except on Wednesday Aug 5 (when it closed unchanged), since announcing its financial results.

Today, the stock closed 78 sen or 4.08% lower at RM18.36.

The analyst, who requested anonymity, however expects future announcement of earnings from glove makers to exceed consensus expectations, which should further catalyse the glove rally.

Indeed, Supermax Corp Bhd beat estimates by reporting record fourth quarter earnings today.

The group posted a record quarterly net profit of RM399.62 million, against RM15.06 million a year earlier. For the full year (FY20), the group posted its highest ever net profit of RM525.58 million, up 327% from RM123.11 million in FY19.

However, Supermax shares continued to decline today, prior to the announcement of the results. It was the day’s third biggest loser title on Bursa Malaysia, falling by RM1.72 or 7.5% to RM21.20.

This was its second straight trading day of losses, after it reached a record-high closing price of RM23.78.

The day’s top two losers were Supermax warrants Supermax C-83 and Supermax C-80, which slumped RM2.22 and RM2.06 respectively.

Elsewhere, Top Glove Corp Bhd, the second largest company by market capitalisation on Bursa, saw its shares plunge 94 sen or 3.34% to RM27.20.

Shares of Kossan Rubber Industries Bhd saw a bigger fall of RM1.08 or 5.69% to RM17.90.

Besides the big four glove counters, Comfort Gloves Bhd, Rubberex Corp (M) Bhd and Careplus Group Bhd also tumbled today.

Comfort Gloves was down 55 sen or 9.79% to RM5.07, while Rubberex fell 45 sen or 6.87% to RM6.10.

Careplus plunged 18 sen or 4.19% to close at RM4.12 today. The two weeks preceding last Wednesday saw its share price almost triple to an all-time high closing price of RM5.40, but the counter has closed lower every day since.

Kossan Rubber is expected to announce its financial performance for the quarter ended June 30 by the end of the month, while Top Glove is slated to release its latest results by October.

According to Bloomberg data, earnings consensus for Top Glove’s financial year ending Aug 31, 2020 is a record high of RM1.44 billion. The company would need to achieve RM866 million in net profit in the quarter ending Aug 31 — a 149% jump from the preceding quarter to meet market expectations.

Likewise, Kossan is expected to see a 207% growth this coming quarter to meet its earnings consensus.

Source: TheEdgeMarkets