Singapore Gloves Sector - Privatisation catalyst


Top Glove’s M&A ambitions and weak MYR triggered a share price rally among Malaysia-listed glovemakers.

■ Singapore-listed glovemakers Riverstone and UG Healthcare are laggards in the rally, possibly due to slower newsflow and investors being too preoccupied with the penny stocks rally.

Maintain BUY on Riverstone and UG Healthcare. Both stocks are trading at deep discounts to peers (20% for Riverstone and 50% for UG in FY16). Another round of multiple expansions is possible if the rally continues.

Malaysia’s top four Glove Companies
Top Glove’s M&A ambition triggered a rally
Malaysia-listed glove makers ended yesterday with a strong rally, led by Supermax (+12%), Careplus (+10%), Rubberex (+6%) and Top Glove (+5%). We believe that it is driven by Top Glove’s aggressive M&A target and continued MYR weakness (-0.5% yesterday and -2% WTD). We understand that Top Glove has 3-4 proposals on its table and 1 deal could conclude in the next 6 months. Management is looking at players in the specialty glove and condom space, which will provide diversification to the group.

Singapore-listed glovemakers are laggards
Share prices of SGX-listed glove makers Riverstone and UG Healthcare have fallen 2-3%, instead of rising along with its Malaysian peers. We believe this could be due to slower newsflow and investors being too preoccupied with the penny stocks rally.

Riverstone and UG Healthcare both fit the bill for Top Glove, as both are differentiated players. Riverstone dominates the cleanroom segment while UG Healthcare has an established distribution platform and it distributes Top Glove’s products.

Valuation multiple re-rating likely
Maintain BUY on Riverstone and UG Healthcare with TP of SGD2.12 and SGD0.41. Both stocks are trading at deep discounts to peers (20% for Riverstone and 60% for UG in FY16). We think that another round of multiple expansions is possible if the rally continues. (Read Report)

Source : Maybank Kim Eng Research

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