1. COVID-19 daily new cases in Malaysia breached 2,000. New cases hit 2148 today which is 14% higher than yesterday's 1889. More importantly, it breaks the psychological level of 2000 cases. Sarawak reported the highest infections at 512.
2. This may explain the strong price performance today for gloves companies This may have increased the interest in gloves sector today. As of time of writing, six gloves stocks under our coverage have gained between 6% to 13%.
3. Our BUY calls are fundamentally driven with Kossan (TP: MYR5.45) as preferred pick Sentiment aside, our TP are already assuming long term gloves ASP of USD40 as compared to current ASP of between USD80-100. Our preferred pick is Kossan. In the near term, it should benefit from the nitrile glove shortage. 80% of its sales volume is derived from nitrile gloves, and the rest from latex gloves. Its expansion plan is intact, with Plant 19 fully commissioned in Aug 2020 – bringing total capacity to 32bn ppa. Looking ahead into FY21, the company plans to increase capacity by 1.5bn ppa by constructing Plant 20. This is slated for full commissioning by 1H21.
4. Other BUY calls are Top Glove (TP: MYR6.80), Supermax (TP: MYR8.75), Comfort Gloves (TP: MYR:2.60) and Rubberex (TP: MYR1.60).
RHB Research
