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$Riverstone (AP4.SG)$ Phillip Capital said the worst is over...

Phillip Capital said the worst is over for Malaysian rubber glove sector. Phillip Capital has initiated coverage on the Malaysian rubber glove sector with an "overweight" rating and said the supply-demand dynamics for the glove market are expected to further recover in 2024.
In a sector update on Tue, the research house said demand is expected to pick up on re-stocking activities following past two years of inventory adjustments.
It said average selling price (ASP) has stabilised and is likely to trend higher on a more balanced market.
"For sector top picks, we have 'buys' on Hartalega Holdings Bhd (TP: RM3.35) and Kossan Rubber Industries Bhd (TP: RM2.35).
"We like both for [their] more efficient cost structure and strong balance sheet with high cash level."
"We have a 'sell' rating on Top Glove Corp Bhd (TP: 60 sen) on near-term earnings turnaround uncertainty due to a less efficient cost base," it said.
But Top Glove, having dropped so much, is a buy.
Phillip Capital said it sees the current sector recovery as sustainable and driven by a more favourable market dynamic.
"The decommissioning of inefficient production lines by Hartalega, Top Glove, and Kossan has helped reduce the global capacity.
"We believe the re-stocking activities will sustain over 2024/25, with global demand expected to recover to 329 billion/368 billion (up 15%/12% year-on-year), respectively.
"Our current projection shows Hartalega, Kossan and Top Glove utilisation rates are expected to recover to 80%/62%/36% (from 46%/50%/30%) in CY2024 (calendar year 2024) with Chinese glovemakers operating at near full capacity," it said.
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