OSK: Stick to big glove makers

Investors are recommended to stick to bigger rubber glove manufacturers like Top Glove Corp Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd because they have the financial muscle to withstand any unexpected future setbacks.

OSK Research, in its note today, said the recent development in the industry has cast a cloud over the rubber glove sector, and was met with mixed views on the industry''s outlook.

"While funds that are still positive on the sector are busy 'shopping' given that the share prices of most rubber gloves companies have dropped by 10-20 per cent, those who are neutral are still sitting on their existing shareholdings," it said.

It said some funds were shying away from the sector out of fears stoked by rising concerns on its near-term prospects.

OSK said while none of the concerns was new, it believed they, which had crept into investors'' radars in a big way, did not emerge out of the blue and had probably been made known to them in early 2010.

"These investors, we believe would have prepared themselves for such negative news when they decided to invest in or hold on to their shares in rubber glove companies," it said.

Hence, it said, the recent negative developments in the sector would not catch investors off-guard.

On the current high latex price, OSK said the rubber glove manufacturers were comfortable with the current latex cost, since the price had stabilised.

"They would be able to pass on the cost increase to their customers more accurately," it said.

The research house said concerns over high latex prices had been over played and should be re-visited only in first half of 2011. - Bernama