KUALA LUMPUR, Jan 22 — Maybank IB Research has upgraded its outlook on Malaysia’s gloves sector to “positive” following expectations of a strong global demand for the product.
In a research note today, Maybank IB Research analyst Lee Yen Ling said this was due to the high possibility of the coronavirus outbreak developing into a global pandemic.
She noted that during the SARS (2002- 2003) and H1N1 (2009-2010) outbreaks, global demand for gloves had jumped by an average growth rate of 13 per cent.
“In our stock universe, we think Top Glove would be the biggest beneficiary given its fastest capacity growth of 18 per cent in 2020, but there is no change to our earnings forecasts for now,” she added.
Lee said the research house has made the following changes — raised its call for Top Glove to “buy” from “hold” with a higher target price (TP) of RM5.65; maintained “buy” for Kossan with a higher TP of RM5.30 and retained “hold” for Hartalega at an unchanged TP of RM5.75.
Meanwhile, AmInvestment Bank has upgraded its call on the gloves sector to “overweight” from “neutral” based on an expected rise in demand.
“We raise the price-to-earnings ratio valuation for Top Glove, Kossan and Hartalega to 30x, 25x and 35x respectively.
“Currently, we forecast the revenue for glove companies under our coverage to increase by more than 10 per cent each in 2020,” it said.
At 12.50pm, Top Glove’s shares rose 31 sen to RM5.42 with 23.77 million shares transacted; Kossan increased 27 sen to RM4.74 with 7.15 million shares transacted; and Hartalega gained 25 sen to RM6.05 with 11.6 million shares changing hands.
Meanwhile, FXTM market analyst Han Tan said Asian stocks and currencies were mixed as investors grapple with the extent of the coronavirus outbreak and its potential implications on global economy.
“Amid hopes that the authorities in affected countries are better equipped this time around following other epidemics over the years, the losses in risk assets should prove transitory as long as investors’ fears can be reined in.
“This outbreak is sure to test the risk appetites of investors who have already overcome the flare-up in the United States-Iran conflict earlier this year,” he said.
However, should the World Health Organization label the outbreak as an international public health emergency, that could catalyse further losses in riskier assets while boosting demand for safe havens, said Tan.
“If the authorities around the world show signs of failing to contain the coronavirus for an extended length of time, that could prompt a sustained risk-off period in the markets,” he added. — Bernama
