Malaysia
glove manufacturers supply the majority of glove markets in the world, they
constitute above 60% of the world market share. In particular, Top Glove claims
to be the world’s largest glove manufacturer in the world, while Hartalega
claims to be the world’s largest nitrile glove manufacturer in the world.
Below
is a comparison of the major glove manufacturers in Malaysia, in terms of
earnings, dividend return and efficiency of the management. Scores are assigned
to each indicator and added up together to obtain an overall performance score
for each manufacturer, which gives an indication of the glove counters most
worthy to invest in.
SECTION
1 – CURRENT EARNINGS, SHARE PRICE AND PRICE TO EARNING (P/E) RATIO
In
terms of share price and earning per share, Top Glove, Hartalega and Kossan
Rubber are the top three performers. Accordingly, these three counters also
have the highest P/E ratio, indicating they are more expensive to invest in.
Also, as shown by the five-year earning per share trend, Top Glove, Hartalega and
Kossan Rubber shows a decreasing trend of earnings from year 2015 to 2019. This
may be caused by decreasing profit margin resulted from strong competition.
SECTION
2 – DIVIDEND PER SHARE, DIVIDEND YIELD AND DIVIDEND PAYOUT RATIO
Dividend
payout by listed companies to shareholders is an additional return of investment
to shareholders in addition to the increase of share values. Generous dividend
payout to shareholders will attract more investors to invest in the counter.
Top
Glove and Hartalega pay the highest dividend per share overall. However, due to
the expensive share price, the dividend yield is below 2%, which is lower than
fixed deposit rate. Also notable Hartalega is the most generous in dividend
payout, whereby it paid out more than 60% of its earnings in the latest
financial year.
SECTION 3 – PERFORMANCE OF THE MANAGEMENT TEAM
The long
term success and profitability of the glove manufacturers will depend of the
efficiency and smart strategies of the companies’ management team. Some of the
indicators offer some ideas on the strength of the management teams.
Among
the manufacturer counters investigated, it is shown that Hartalega has the highest
return on equity, meaning it earns the most profit per unit of capital provided
by the shareholders. Also it has the lowest cost-to-income ratio, meaning it is
able to control operational cost to the lowest possible level. Increasing implementation
of automated production lines decreases labour cost. In addition, Hartalega
uses empty oil palm fruit bunches as biomass fuel to generate heat for
production processes, which decreases power cost of the manufacturing plants.
Also,
noted Top Glove, Hartalega and Kossan Rubber invest significantly on capital
expenditure in order to increase production capacity. This could decrease the
per unit production cost of the gloves and in turn increase profitability.
SECTION
4 – CASH AND ASSETS VALUES
Sufficient
amounts of assets and cash are important for security of the manufacturers in
case any emergency situations happen. According to below graphs, it is shown
that most of the manufacturers investigated are well-supported by sufficient
amount of assets, such as net tangible assets (NTA), market capital and cash
flows. So, overall these counters are safe to invest in.
SECTION
5 – MARKET CONFIDENCE ON THE COUNTERS
Overall,
there is great interest invest in the major glove counters, such as Top Glove,
Hartalega and Supermax, which is shown by the number of shareholders and daily
trading volume. Also noted these counters are well supported by institutional
investors such as EPF, foreign and local investments funds and insurance companies.
Each of the investigated bank counters are assigned a score based on the above indicators. For each indicator, the best performing counter is given score 7, the second best performing counter is given score 6 and so on. The total score for each counter is added up to give an overall performance score of each counter. According to the below graph, overall best performing counters are Top Glove, Hartalega and Kossan Rubber, respectively. In conclusion to the above analysis, these are the three counters most recommended to invest in in the gloves manufacturing sector.
NOTES:
**DATA BASED ON ROLLING 4 QUARTERS AS OF 27/11/2019 AND THE LATEST
PUBLISHED FINANCIAL REPORTS.
VOL: VOLUME, EPS: EARNING PER SHARE, NTA: NET TANGIBLE ASSET PER SHARE,
DPS: DIVIDEND PER SHARE,
P/E: PRICE EARNING RATIO, ROE: RETURN ON EQUITY, DY: DIVIDEND YIELD, DPR:
DIVIDEND PAYOUT RATIO
Latest analysis
reports of individual glove counters:
1.
TOP GLOVE
2.
HARTALEGA
3.
KOSSAN RUBBER
4.
SUPERMAX
5.
COMFORT GLOVES
6.
RUBBEREX
7.
CAREPLUS
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