Stock Of The Week: SUPERMAX Corp Bhd

There seems to be renewed investor interest in gloves producer Supermax Corp Bhd after its management reveals that the company's two new plants in Klang will be completed in the first quarter of next year.

The two new plants, equipped with inter-changeable lines for both natural rubber and nitrile golves, are expected to significantly boost production capacity. And the company has apparently secured orders for about 60% of the total production capacity for the two new plants.

According to Affin Research, Supermax's positive prospects in the months ahead will be abcked by resilient demand growth, favourable raw material prices and plant automation that could boost operating efficiencies.

It adds that Supermax's earnings visibility has now improved, thanks to healthy capacity expansion for both nitrile and surgical gloves, which typeically fetch higher margins as comapred with natural rubber gloves.

CIMB Research is also optimistic about Supermax, for which it has ascribed an "outperform" raitng, citing that strong demand and widening margins as catalysts for Supermax.

The company is poised to tap on the strong demand of nitrile gloves, CIMB Research says, adding that this will be happen as soon as Supermax's new production capacities from the new plants kick in within the next two quarters.

The fact that Supermax is currently trading at undemaning valuation of only around nine times its 2014 price-earnings ratios makes the counter even more attractive.

Industry average valuation is currently around 14 times. - by thestar.com.my

The comments above do not represent a recommendation to buy or sell.