Supermx announced its results for QE30/9/2010 yesterday. Its net profit dropped 17% q-o-q or 5% y-o-y to RM38 million while its turnover was relative unchanged at RM235 million. This means that Supermx reported a second quarter of sequential drop in its bottom-line, which confirmed my belief that the rubber glove sector has peaked & future earning is likely to be lower.
Table: Supermx's last 8 quarterly results
Chart 1: Supermx's last 16 quarterly results
Technical Outlook
From the chart below, we can see that Supermx is likely to drift lower & test the psychological level of RM4.00 & possibly retesting its recent low of RM3.75.
Chart 2: Supermx's weekly chart as at Nov 9, 2010 (Source: Quickcharts)
Conclusion
Based on the declining trend in Supermx's bottom-line, I believe this stock is a SELL until a clear sign that this trending has reversed or the technical outlook has improved.
Alex :
ReplyDeleteI do appreciate your post about the rubber glove industry. But I think it is a bit flaw to lump Hartalega together with the rest of the players. Nitrile glove is eating the rubber market. So as long as the latex price keep on going up more and more consumer will switch to nitrile glove. Currewntly nitrile glove is selling cheaper than rubber glove. Only time will tell. I am longing Harta big time. Hope I am right about this.
Hi Alex,
ReplyDeleteOSK is on the move. Any comments. Managed to get it at RM1.61. It's now doing RM1.91. How far do you think it will go?
Hi Alex, what your opiniun on Scomien Share? I'm been looking on this share for quite some time and plan to invest on it. Please share with me on what u think about this share cause I plan to get in at RM 1.00. Hope you could help me.Thanks :)
ReplyDeleteDear Alex,
ReplyDeleteI'm afraid I can't agree with you regarding your statement of "the rubber glove sector has peaked & future earning is likely to be lower."
Because current situation of most glove companies decreasing profit is because of weaker USD and bad weather, that pushes rubber price sky high. If we look at supermax revenue, it is actually increasing. Meaning, it has growing potential and it is proven to be growing. Just that the profit drops, again, cause by weaker USD, not because of glove market.
No offense, just my view.
cheers
Hi Akagi Shigeru
ReplyDeleteYou are right about the demand for nitrile glove. The latest results for Harta certainly reflects it.
Hi jeremy tan
ReplyDeleteOSK broke above the strong horizontal resistance at RM1.55-1.60 & flew. Its next resistance is at RM2.00, RM2.25 & RM2.40.
After its sharp rise yesterday, the stock may have to consolidate for a while before challenging these resistance levels.
Hi steve
ReplyDeleteYou could be right on the impact of USD weakness on rubber glove makers as well as the higher cost of rubber latex. But, these did not pose any problem in the past. In the past, they could pass the increased cost to the customers. Why not now? Something have changed and that's the dynamic of supply & demand. Once that change has set in, the players in that sector would take a while to digest the new dynamics to arrive at an equilibrium. Look at the downturn in CPO in 2008-2009. Only now we can see a new uptrend in CPO prices as well as plantation stocks. The same should play out in rubber glove sector, with nitrile glove producers enjoy some respite.
Hi Raymond Y
ReplyDeleteScomien is an inconsistent performer, albeit being profitable for the past few quarters. For 1H2010, its net profit was about RM11 mil (cf RM37 mil for 1H2009). For FY2009, its net profit was RM61 mil (cf RM12 mil for FY2008). Based on the results for 1H2010, its annualized EPS for FY2010 would be 7 sen. At its close of RM1.05 yesterday, Scomien is trading at a PE of 15 times.
Chartwise, Scomien is in an uptrend line with support at RM1.00, which is also a strong horizontal support. Its immediate resistance at RM1.20.
I am excited about this stock but I see the downside risk as lower if you can get into this stock at RM1.00.
Hi Alex,
ReplyDeleteI agree on ur take on many occasions but this time I totally disagree with ur view on the rubber glovee sector and I agree totally with Akagi & Steve view. Just imagine if wet latexx prices & US Dollar currency have been fairer to these glove companies, Supermax would have posted hugh revenues & profit for these quarters. Supermax shares would be trading in the high RM 7.00. TA don't work in this case. The main fact remains are loads of containers are being shipped out from their factories these last 6 months. I urge traders to take advantage any drop in share prices to accumulate. This has nothing to do with supply & demand Factor. Normalizing due to H1N1 is also not a big factor. The fact remains are the world population rate are growing much more rapid than these companies can produce gloves & many government have prioritize healthcare as their main priorities whether in emerging or mature countries. Just my take.
By the way, keep up the good work Alex.
Hi takeiteasy,
ReplyDeleteYour point noted. We can never be too sure how the various scenarios would pan out. If you find the reduced price of the rubber glove stocks to be too attractive to miss, then you may want to build up a small position in these stocks. A bit of insurance is not a bad thing.