Supermax still has room to revise ASPs, but analysts concerned on overseas venture
KUALA LUMPUR: Supermax Corporation Bhd (Supermax) still has room to revise upwards its average selling price (ASP), analysts note, but others are also concerned about execution risk in the group’s overseas venture.
The research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) believed that Supermax may be able to continue to command strong prices for the group’s products as gloves are still in shortage.
“Moreover, prices for natural rubber gloves, which had been lagging behind the price hike of nitrile gloves, has been improving as the gap between the price difference of both products started to narrow,” MIDF Research said.
“Of its total production, 68 per cent is nitrile gloves while 25 per cent is natural rubber gloves.”
On Supermax announcing that it would allocate US$550 million (circa RM2.2 billion) to build glove factories in the US, MIDF Research opined that the company is in a good position to expand overseas given its strong net cash of RM3.4 billion during the quarter, which is higher than the RM2 billion in the preceding quarter.
In contrast, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) is concerned about execution risk in Supermax’s overseas venture.
Kenanga Research recapped that Supermax is venturing into the US to manufacture medical gloves and other personal protective equipment (PPE) with an initial capital outlay of US$100 million (RM405 million).
“The capex earmarked for this venture is US$300 million for Phase 1 and US$250 million for Phase 2. Plant 18 in US would kick start in the first half of 2021 (1H21) and targeted to commission in stages starting 1H22.
“The group have shortlisted several suitable manufacturing sites for this Plant 18 in the US and is currently working with state and local county there for various infrastructural support.
“As for Plant 19 in the UK, the group is presently studying the suitability of the manufacturing site. Plant 12 comprises Block A and Block B (total 4.4 billion pieces) have been completed following the commissioning of Block B of in the second quarter of financial year 2021 (2QFY21), adding 2.2 billion pieces bringing installed capacity to 26.2 billion.
“It is concurrently building five glove manufacturing plants scheduled for completion progressively between now and 2022 which will add 22.3 billion new capacity and raising total capacity to 48 billion by end2022.”