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Friday, July 19, 2019

CIMB Research retains Add for Supermax, TP RM2.30 on expansion plan

Friday, 19 Jul 20198:26 AM MYT

KUALA LUMPUR: CIMB Equities Research is retaining its Add call for glove maker Supermax Corporation and target price of RM2.30, which is 18.8 times CY20F price-to-earnings.

It said on Friday Supermax plans to buy 6.6 acres of freehold industrial land in Klang, Selangor for RM65mil from Leader Cable Industry.

It plans to build three nitrile glove manufacturing plants (Plants 13, 14 & 15 with total capacity of 13.3bil pieces per annum with a total capex of RM550mil.

Construction and commissioning works of one plant is estimated to take 18 months, with work on the first plant
(Plant 13) starting in 1QCY20. Plant 13 will be a newly-constructed plant, while Plants 14 and 15 will make use of the existing building on the land post renovation works.

“With the addition of the three new plants and taking into account its existing expansion plans, we estimate that Supermax’s total glove production capacity will have grown 102% by end-3QCY24F, assuming no delays to its expansion plans.

“We gather that the location of this land is strategic as it is close to its existing plants in Meru, Klang. In addition, all necessary water and electricity supply to support glove production at these upcoming plants have been approved and are available currently.

“Note that we expect maiden earnings contribution only from 3QCY22F (1QFY6/22F) onwards, upon commercialisation of the first plant, Plant 13,” CIMB Research said.


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