FIGURE 1: RUBBEREX
CORPORATION (M) BERHAD LAST 5 YEARS SHARE PRICE TREND
**analysis
based on 2019 annual report.
1.
GENERAL
INTRO: RUBBEREX is principally involved in the manufacturing and sales of
gloves. The Group’s glove manufacturing plants are located in Bercham, Ipoh,
Perak, Malaysia, producing household or general-purpose gloves, industrial
gloves as well as nitrile disposable gloves for the export market.
2.
NOTABLE
POINTS:
a. In
FY2019 the Group disposed of its China operations and focused on its domestic
operations, particularly in the nitrile disposable glove division. While rising
material and labour costs remain core concerns, the weakened Ringgit during the
year helped cushioned some of the impact to Rubberex Group as a net exporter.
b. In
FY 2019, the Group recorded a pretax profit of RM15.7 million on the back of
RM218.6 million in revenue through the sales of general purpose, industrial and
disposable gloves to markets and customers mainly in Europe, the Americas and
Asia. Profits after tax rose to RM11.4 million, a 31.0% increase from RM8.7
million of the previous year.
c. The
disposal of its China operations during the year netted the Group approximately
RM65.5 million in positive cashflow. Proceeds from the disposal were utilized
for the retirement of term loans amounting to RM27.0 million and part financed
its nitrile disposable glove plant expansion.
d. Plans
are in the pipeline for further investments within the next three years that is
estimated to double its annual production capacity up to 5.0 billion pieces of
disposable gloves by year 2023, with a conservative 25% annual growth rate
projection. Capitalizing on its solid customer base and strong track record in
the glove business, Rubberex envisions to become a more significant glove
player, on par with several of its peers in the industry.
3.
IS
THIS COUNTER A STRONG GROWTH STOCK?
a. REVENUE
RANGE (RM million): 218.6 million as reported in 2019 annual report, this is a medium
revenue company.
b. SHARE
PRICE: from 2016-2021, share price surged from around RM0.45 to a peak of
RM7.50 at the start of the COVID-19 pandemic and then subsequently dropped back
to current level of around RM1.50.
c. EARNING
PER SHARE (EPS): earning per share in last 5 years was overall steady, which
ranged from 2.92 to 7.34 sen, except for FY2020, the increased gloves demand
brought about by the COVID-19 pandemic enabled RUBBEREX to realise an earning
per share of up to 28.78 sen.
d. PRICE
TO EARNINGS (P/E) RATIO: current P/E ratio is at 16.18, which is not too high.
e. FUTURE
POTENTIAL/PROSPECTS: share price expect to be stable in the next few years
f.
CAPITAL EXPENDITURE (CAPEX): spending on
purchase of new fixed assets and other investments amount to about RM 31.1
million, which is around 11% of total assets.
4.
IS
THIS A STRONG DIVIDEND STOCK?
a. DIVIDEND
YIELD: in 2019 financial year, RUBBEREX declared a dividend payout of 2 sen to
shareholders, which amounts to a dividend yield of 1.36%.
b. DIVIDEND
PAYOUT RATIO: the dividend payout ratio amounts to 44%. In the last five years,
the dividend payout ratio ranged from 22 to 51%.
c. CONSISTENCY:
the dividend payout was very consistent, the dividend paid to shareholders in
the last five years ranged from 1.75 to 3 sen.
5.
IS
THE MANAGEMENT PERFORMANCE GOOD?
a. RETURN
ON EQUITY (ROE): in 2019 financial year, RUBBEREX reported a poor return of
shareholders’ equity, at 5%. This was significantly increased to 9% in FY2020
due to the increase in earnings.
b. COST-TO-INCOME
RATIO: the cost-to-income ratio is 1292%, which is quite high.
6.
OTHER
INDICATORS:
a. CASH
FLOW: cash flow is positive, at around RM 55.7 million, equivalent to RM 0.22 per
share.
b.
SUPPORT BY INSTITUTIONAL INVESTORS: this counter
is not well supported by institutional investors, there are only 12 institutional
investors at top 30 major shareholders list, including a few investment funds
but not including insurance funds. Its major shareholders are Erpstar Inc. Sdn.
Bhd. (32.5%) and Aun Huat & Brothers Sdn. Berhad. (9.99%).
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