PETALING JAYA: Research houses appear to be cautiously optimistic on Supermax Corp Bhd’s outlook after the ban on exporting its disposable gloves to the US was lifted.
On Wednesday, US customs authorities announced that they are now permitting the entry of disposable gloves produced by Supermax and its subsidiary companies into the country.
The ban was issued in 2021 following allegations of forced labour practices in the group’s supply chain.
In a research note today, Kenanga Research expressed limited optimism about the ban’s removal, believing that this development is unlikely to significantly enhance the group’s outlook given the prevailing sectoral challenges stemming from substantial overcapacity.
Kenanga maintains its “market perform” call on Supermax with a target price (TP) of 85 sen (from 80 sen) to mirror an improved environmental, social and governance (ESG) rating.
“The group predicts a recovery sometime in late 2024,” it noted.
“Nevertheless, we expect the oversupply situation to be less acute and gradually improve following signs of players culling production capacity via decommissioning of selective plants,” it added.
Meanwhile RHB Securities maintained its “neutral” call on Supermax given the lack of short-term demand visibility, on top of challenges to raise prices in the near future.
“We expect a demand recovery to happen by the second half of the 2024 financial year, given that we have yet to see consistent export figures,” it said.
However, it believes that local glove manufacturers including Supermax might potentially benefit from normalised cost projections and industry-wide capacity management initiatives.
Nonetheless, the research house raised the group’s TP to 87 sen, from 80 sen previously.
For the fourth quarter ended June 30, 2023, (Q4 FY2023), the group concluded its fiscal year with a net loss of RM7.17 million, marking its third consecutive quarterly loss.
As at 12.27pm, Supermax’s share price was unchanged at 86 sen, valuing the group at RM2.33 billion.