Supermax Share Price – Established in 1987, Supermax Corporation Bhd (Supermax) is currently one of the largest rubber glove manufacturers in Malaysia. As of 15 February 2019, it has a market capitalization of RM 2.22 billion. In this article, I will share its recent financial results, its growth strategy and evaluate it based on the current share price of RM 1.63 per share. So, here are 12 important things to know about Supermax before investing.
Its cash balance has been maintained at RM 100 – 150 million for the past 9 years since 2009. Therefore, Supermax has demonstrated the ability to generate cash flow and pay dividends to its shareholders – a long-term investment.
Supermax Share Price
Supermax has grown at a slower pace compared to its peers in the rubber glove industry such as Hartalega, TopGlove, Kossan and Riverstone. Obviously, its peers have seen consistent growth in profits over the past 10 years, suggesting that Supermax’s results are not on par with its peers.
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Based on its valuation, Supermax trades at a P/E ratio of 18.91, a P/B ratio of 1.01 and pays an annual dividend of 2.45%. Are they attractive to you?
Financial Content Tool. Dividend investors. More than 450 financial articles have been published in KCLau.com in Singapore and The Fifth Person, Value Invest Asia and Small Cap Asia Malaysia. Regular host and presenter of Finance Network Weekly with KCLau.com. Co-founded DividendVault.com, an online membership platform that enables retail investors to build stock portfolios that deliver year-on-year dividend growth in Malaysia and Singapore. KUALA LUMPUR (Aug 27): Shares in Supermax Corp Bhd rose 15 sen. OR 4.87% in morning trade today at RM3.23 in Bursa Malaysia The rubber glove maker yesterday announced a 15 sen special dividend and RM3 a year ahead of demand for gloves driven by the Covid-19 pandemic.
The special dividend lifted Supermax shares to a record high of 31.8 sen as investors closely watched the company’s earnings against demand for gloves as a key personal protective equipment to prevent the spread of disease.
At 10.29am today, Supermax’s share price rose to RM3.20 after falling to RM3.08 yesterday (Aug 26), the lowest closing price since the stock closed at RM2.98 on May 8, 2020.
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Today, Supermax’s share price at RM3.20 is worth RM8.32 billion based on 2.6 billion shares issued.
A common theme in analysts’ research notes on Supemax today is that average selling prices (ASPs) for gloves are expected to decline.
“Going forward, supermax ASPs will continue to decline due to new global glove supply capacity and slower consumer purchases,” CGS-CIMB Securities analyst Sdn Bhd Walter Aw wrote in a note today.
TA Securities Holdings Bhd analyst Tan Kang Jin wrote in a note today that despite the latest wave of Covid-19 globally, Glove ASPs are declining as more new capacity is available in the market.
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“Meanwhile, (Supermax) management expects demand for live gloves to remain strong until 2021, in preparation for higher recruitment and increased healthcare spending budgets,” Tan said.
Yesterday, Supermax said its revenue for the financial year ended June 30, 2021 (FY21) reached RM7.16 billion.
For the fourth quarter ended June 30, 2021 (4QFY21), Supermax said net profit rose to RM958.71 million from RM398.83 million, while revenue stood at RM1.88 billion compared to RM929.12 million.
According to Aw today, Supermax’s full-year net profit of RM3.9 billion was 97% below CGS-CIMB’s full-year forecast, but 106% above Bloomberg’s consensus estimate for the full-year report.
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CGS-CIMB reaffirmed a “hold” call on Supermax shares, with a lower target price (TP) of RM3.20 from RM3.50 previously, it said.
“We have lowered our FY21-23F EPS estimates by 4.3-12.1% as the recent lockdown measures impact: i) lower production volumes, ii) delays in capacity expansion projects and iii) idle costs (periods during which it is unable to operate, ” he said..
At TA Securities, Tan said Supermax’s full-year net profit of RM3.81 billion came in at 104.1% and 103.7% of TA Securities’ expectations and consensus estimates, respectively. Hidden gems can be very valuable to investors. Through this blog, I will unearth this hidden gem and show the very simple logic of why it is not worth it. Without complicated guesses and assumptions, my approach is a simple analysis, which would be logical for anyone on the street to think that these gems are undervalued.
Unless you’ve been sleeping under a rock for the past few years, you’ve surely heard about the incredible roller coaster the glove counter has experienced over the years. Supermax Bhd is our special focus stock. In simple perspective, if you had invested RM1,000 in the counter at the beginning of 2020, you would have invested a maximum of RM14,620. In addition to its share price, the company had a surprising jump in revenue. For the financial year ended June 2021, the company posted a record revenue of RM3.8 billion on RM7.1b. As the company’s average annual revenue was around RM100 million, the revenue for that year alone was equivalent to the company’s 38 years of revenue.
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The company’s balance sheet turned around overnight, which is worthy of the record books. At the end of the 2019 fiscal year, the company had net debt of about 200 million. This number changed dramatically at the end of the 2021 financial year, where it reported a net cash of RM3.50 billion! Basically he can pay back 17.5 times his loan!
Unfortunately, and indeed, all big bubbles must end. After peaking in August-September 2020, the opposite share price began a long and steady decline. In the nearly 18 months since its collapse, the share price has fallen 90% from its peak. So is this sale fair and is the valuation shown logical?
Before going into the discussion of today’s valuation discrepancy, let’s first look at the interventions that the company faces.
To highlight the significant undervaluation, let’s first discuss the company’s future earnings. Instead of trying to guess on our own, let’s take advantage of the work done by experts in the field. Below is a list of the most recent analyst estimates for Supermax’s earnings for the next 2 fiscal years.
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Supermax should make a net profit of RM1.7 billion for FY2022 and RM1 billion for FY2023, according to average revenue estimates. So in our estimation, let’s be conservative and lower the projection by 30%. This means Supermax’s profit for FY22 is RM1.2bil in FY21 and RM700mil in FY23.
This figure represents a 41% return on a market capitalization of RM2.91b! If the company keeps the dividend payout ratio at 20% in FY21, it will mean a dividend yield of 8% in FY22 and 4.8% in FY23. Although many discounts are offered, the potential earnings are above average compared to most counters in Bursa Malaysia.
From 2016 to early 2020, the company’s average PE ratio is 18-19x. Applying the same PE ratio to the company based on FY23 earnings, the company’s valuation would be:
Using the company’s historical PE ratio and after applying a 47% discount to the PE ratio, the company’s future earnings should be estimated at RM7bil! If you include the current net cash balance, the company should be worth at least RM10.5 billion. That’s 3.6 times the current market cap!
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If you look at the figures above, the company’s market capitalization is RM600 million less than its net cash! That means you pay RM600 million for a company that should generate RM1.2 billion in FY2022 and RM700 million in FY2023! How stupid??
Tan Sri Stanley Thai currently owns 38% of Supermax. That means the market value allocated to the shares it does not own is RM1.8bil. If he paid a simple 50% premium to market capitalization, it would cost him RM2.7bil to acquire the shares he does not own. It has net cash of RM800 million and the company is expected to earn RM1.2 billion in FY2022 and RM700 million in FY2023. This means a 50% price acquisition now will give him a free RM2.7bil by the end of next year!
With this gigantic underbelly, one has to wonder what he has in store and maybe you can benefit from it.
Your analysis is very strong. But what if the analysts are wrong and Supermax CarePlus and other glove companies go into the red?
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