Supermax @ 2.16

Enter Supermax @ 2.16

 

I had been eying the glove counter for few weeks, comparing few glove makers, below is some of my though on timing:

1. Supermax is having the lowest PE at this moment with about 11, TG is running around 15 and KOSSAN is 18.

2. TG and KOSSAN start to move a bit already and left only Supermax. Yesterday it closes at flat but there is a spike up to 2.2+ during lunch time.

3. Weekly volume starts to pick up in pass 3 weeks, 10 days average price start to trend up.

*From TradeSignum

 

Business point of view, global glove demand is always in increasing trend but it is slow and steady kind of uptrend, unless there is a global illness issue like SARS kind of thing, else i don't think the market will react actively with this kind of silent growth, thus i do not expect the share price to shot up spiky unless it get goreng, but long term, it should be trend up to reflect the actual value of the company. from 2013 annual report, the CEO Stanley Thai had mentioned that Supermax had set up a sales office and store in US Chicago, this move is encouraging as US is the major market of medical glove. On top of this, on June 2014, Stanley also highlight that that company is moving into RUSSIA and other ASIAN counter as they are seeing more business opportunity here. it is obvious that the company is aggressively improving the market share and looking for new business opportunity. In negative side, China is also aggressively expanding their market share in glove industry, this remain a competitive challenge to the company with the potential risk of oversupply. We see this effect in pass one year on all Malaysia glove makers.

*From I3invetor page

 

As for the accounting figure of Supermax, latest 2 quarters is running with low revenue mainly due to the output shortage caused by the fire of her manufacturing site in Alor Gajah, the manufacturing line is expected to be fully recovered by Sept/Oct 14. Thus, it should be any issue there. Debt wise, obviously Supermax is not a cash rich company for now, however, with the business outlook that they have, it is acceptable to me if they reserve the money for business expending. 
 

*From 2013 Supermx Annual Report

 

Share holder wise, top 3 share holders had taken up about 42% of total share, and top 30 share holders had consumed up to 65% of total share. EPF is the 3rd largest share holder but its only takes about 6.25%. Top 2 shares holder is Mr and Ms Stanley Thai. Recently EPF is keep on selling but the company is keep on buying back, from here, i can feel that the company is quite confident with their future especially the key share holder.

 

 

*From Q1-2014 Supermx Quarter Report

 

*From 2013 Supermx Annual Report

 

"On the dividend front, similarly to FYE2012, the Company has paid out an interim 4% tax exempt dividend for FYE2013 and the Board has proposed a final 6% tax exempt dividend which is subject to shareholders’ approval at the upcoming Annual General Meeting. This is largely in line with our aim to pay out 30% of Profit after Tax (increased from 20% prior to FY2012) in order to further reward our loyal and supportive shareholders". -- Supermax 2013 Annual Report

The Company also aiming of giving 30% of profit after tax as dividend to the share holder. From here, it seems like Supermax is not a aggressive 成长股 anymore, well, it still a good news for me anyway.

Based on above brief review, my plan is to invest 30% of my capital in Supermax with buy in 3 steps $2.16, $2.20, $2.24. cut loss at $2.05 (5%). i set the cut loss at 5% is because for me, Supermax is already hitting the bottom, if it went down further at current market, which mean she have some background issue that not known by me. while for accumulation, i buy in 3 stage with 3% increase in share price so that i can make sure i riding on the correct trend and secure my capital if anything went wrong tomorrow.

With the recovery of the production line, i expect the EPS for 2014 to be around 16cent (3.9 for 1st and 2nd Q due to pending production line recovery and 4.7 for Q3 and Q4 with full recovery of the production line) and with the fair PE of 16 in glove industry, the TP for Supermax should be around $2.56. This is equal to around 16% return of my investment. However, I’m going to apply止损不止赚like what i did on ULICORP, the decision of sell will be based on volume and share price momentum. :)

I know it is not responsible to write a lot here and ask you to buy on your own risk, but i still want to say that, buy on your own risk :)