21 September 2007

Supermax and other Latex Glove Companies.

the global demand on latex gloves has been growing exponentially in recent years. Since this growing trend of glove market is not likely to stop for the coming years (though it may slow down gradually) , the latex glove manufacturers will benefit a lots from it.

Malaysia's companies are the largest suppliers of latex gloves in the world. There are several latex glove companies listed on Bursa Malaysia. Here's a simple comparison based on their annual report FY2006:

Obviously, the three largest companies are:

  1. Topglove
  2. Kossan
  3. Supermax

The huge production capacity of these companies ensure that they can produce gloves with lower cost than their competitors. Hence they can maintain their profit margin while keep the selling price competitive. When I decided to buy a glove company, I only considered this three biggest companies. After doing some study, I've chosen to invest in Supermax.

The first reason is Supermax has a better earning power. I've create a table to make a comparison between 3 companies:

(I don't have the EBITDA data of Kossan, but the comparisons of EBITDA should be similar to PBT and PAT)

Clearly, Supermax has a highest profit margin among them. This is a result from the continuous effort of its managment in controlling the cost. The 2% difference in profit margin can make a very big difference, especially when the market become gradually saturated and tough competitions occur. So, I think Supermax will become the last winner, though its growth rate in recent years is a little slower than Topglov and Kossan.
At the end of Sep-2007, when the privatisation of Seal Polymer is completed, Supermax is going to beat Kossan and become the 2nd largest glove company. If Supermax privatise APLI in the future, it will become almost same size as Topglove.
Another reason I choose Supermax, is because the price of Topglove and Kossan are already too high. Look at some figures relating the share prices of these companies:




PAT '2006 (RM million)




No. of share (million)




Earning per share (sen)




Share price (RM)




Equity per share(RM)




Price/Earning ratio




Price/Equity ratio




* the no. of share & equity per share are based on the latest quarterly report.

Due to my investment prinples, I'll never buy a company that has a PE higher than 15, no matter how good is the company. So, I'll never consider to buy Topglove though it's the biggest latex glove company, unless its share price fall below RM4.50. Besides, Supermax's Price/Earning ratio and Price/Equity ratio is significantly lower than the other two, This make Supermax a better choice for a secure investment.

19 September 2007

Reasons of buying Supermax

Let's have a quick look on Supermax. With its current share price of about RM2.40,

  • the P.E. ratio based on the profit for FY-2006 is about 13.
  • the net asset per share is about RM1.20, about half of its share price.
  • the liability to equity ratio is about 1.0

As we can see, the figures are not very attractive. Its share price is not at a bargain level, nor is it very expensive. I may consider its current price is quite 'fair' due to its latest financial condition. I invested in Supermax not because of its cheap price. I invest in it because it is a continuous growing company with a bright future.

As Warren Buffette said, "it's much better to own a wonderful company with a fair price, than buying a fair company with wonderful price".

This is what i feel when I invested in companies like AirAsia and Supermax.

Supermax has some criteria that make it a wonderful company that worth to buy:

  1. Simple business model - manufacturing of rubber gloves
  2. Growing market for its products
  3. Good management
  4. Profitability - Consistent profit margin

Let's go through these one by one:

1. Simple Business Model Supermax has only one core business – Manufacturing and selling rubber gloves. It has a wide range of rubber gloves, made of natural latex or synthetic rubber. Its products are mainly for dental and medical use. Most of the products are exported, mainly to U.S. and Europe.

The merge between Supermax and Seal Polymer is going to be completed by the end of Sep-2007. Seal Polymer is involved in the similar business as Supermax. I like a company that grow while concentrate on its core business.

2. growing industry. The demand of rubber gloves has been growing in recent years, due to the growing health conscious and hygiene awareness, especially in the advanced countries like U.S. and Europe's. And the most important point is, the demand on medical gloves will only keep growing, independent of economical cycle. Hence, Supermax has a consistent growing market. From 2002 until now, Supermax’s revenue and profit had recorded an average growing rate of about 40% per year. I’m confident that its growth rate will be maintained above 20% per annum for few more years.

After merging with Seal Polymer, Supermax now has become one of the biggest manufacturers of rubber gloves in the world.

3. Management Team Tthe financial condition of Supermax is better than other glove companies in Malaysia, due to the continuing effort of its management, under the leadership of its CEO, Mr Thai Kim Sim.

Two years ago, Supermax had acquired shares of Seal Polymer and APLI, and became largest shareholder of these companies. Mr Thai had then become new CEO of these companies. At that time, APLI was suffering loss; and Mr Thai had turn APLI into profitable in early 2007. This is an evidence showing his ability of managing a company, especially in reducing operational cost.

about two months ago, most glove manufacturers in Malaysia faced an allegation by Tillotson Corporation (a U.S. company), of patent infringement of nitrile gloves. Supermax then announced that they will pay the loyalty fee to Tillotson Corporation, for all its nitrile gloves selling in U.S. This immediate response shows that Supermax's management is paying respect to intellectual property of other party.

4. Consistent Profitability About 50% of its cost is the raw material – latex. In recent years, the price of bulk latex rose from RM2 per kg (year 2002) to about RM5 per kg now. But the EBITDA margin of Supermax is maintain at about 15%. So I never worried about the rising price of latex, because Supermax is always able to pass the rising cost onto its customers.

Besides its consistency, Supermax's profit margin is also better than average value of other glove companies. So, it will always be profitable while selling its product with a competitive price.



[updated 10/10/2008]: I sold Supermx at the end of September-2008. Please read this post for the reason.


16 September 2007

comments on the Jun-2007 financial reports

some comments on my companies base on their quarterly reports JUN-2007.

Result quite satisfied. Earning (exclude non-operational item) for the FY2007 ended 30th June is about 16 sen per share, a strong growth compare with last year. A strong growth is expected for the two coming quarter. I’ll continue my plan to accumulate AirAsia’s stock. Hope that its price not going to hike too soon.

Earning for the quarter is about 4 sen per share, a drop of about 50% from the previous quarter. Good news is, it declares an interim dividend of 3 sen, from their half-year earning of 12 sen per share. This shows that the management really applying their dividend policy (30% distribution of earning, announced earlier this year). As the oil price is coming to a record high, Titan’s profit margin may become even lower in the next quarter. I’m not worry about this, as I’m confident that the management is able to raise the selling prices of the product to keep the company to be profitable.

Continue to show a strong growth in both revenue and profit. The merging between Supermax and Seal Polymer is going to be completed soon. The whole contribution of revenue and profit from Spolymer will be shown in the next quarter’s report. The merging shouldn’t have much impact on the earning per share of the company. Though the company is facing a little pressure from the rising price of latex, I'm quite confident that it will maintain its current profit margin, and keep the strong growing rate in both revenue and profit.

AKN – (my short-term investment)
Earning per share for the quarter is about 3 sen, a good improvement, as expected. The loss-making division has been sold, and the cash $$$ is to be receive in the coming quarter. Seeing that it already wind down the DDD division, and the cash generated may be used to settle some of its debt, the performance for the next quarter is likely to be much better. I’ll continue to hold this company until its price hit RM1.40

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