Rubber glove makers set for US boost
KUALA LUMPUR: More stringent hygiene in United States hospitals and labs could boost sales for Malaysian rubber glove makers who produce three out of every five pairs used in the world.
Demand for medical gloves is seen increasing ahead of guidelines from the US Pharmacopeia (USP) Convention that comes into effect in December next year.
Known as the USP 800, the best-practices standard for pharmacies and hospitals will recommend health workers don two pairs of gloves to handle hazardous drugs.
As the US accounted for a third of global demand for medical gloves, the new standards — if widely enforced — could push demand from that market well above its “normal” eight to 12 per cent annual growth rate, said Malaysian Rubber Glove Manufacturers Association (Margma) vice-president Supramaniam Shanmugam.
“If it’s mandatory — then it is a boom,” he said. “I know the amount of gloves that we export is going to be double now. But we’re still studying how the implementation is going to be like.”
Top Glove Corp, the biggest of Malaysia’s 10 publicly-listed rubber glove makers by revenue, derived 31 per cent of financial year 2017 revenue from North America, with Hartalega Holdings Bhd at about 59 per cent.
The region accounts for about a fifth of sales at Riverstone Holdings Ltd and UG Healthcare Corp, both Singapore-listed but Malaysia-based producers.
In a market update this week, Singapore Exchange Ltd noted that the three glove makers on its bourse — Riverstone and UG Healthcare along with Top Glove’s secondary listing — averaged a 12-month total return of 35 per cent.
The exchange said prospects for the global rubber glove industry were robust given expanding healthcare demand.
Ross Cameron, a portfolio manager at Northcape Capital Ltd, which owns 45.3 million shares in Top Glove, said the potential impact from the forthcoming guidelines was “not at all” priced in.
“This is a material positive uplift to earnings as volume numbers will have to be increased as a consequence,” he said.
Other investors say it’s hard to quantify the exact impact from the new guidelines.
“It’s true that USP 800 might drive some incremental demand for gloves, although the quantum of that additional demand may not be material in the context of current global glove demand,” said David Smith, the head of corporate governance at Aberdeen Standard Investments Ltd, which owns Riverstone shares.
Still, Riverstone sees its customers buying more gloves from the third or fourth quarter of next year. “It’s an additional 3.5 billion pair of gloves every month,” said chief executive officer Wong Teek Son.
Supramaniam said Malaysian producers could step up production if required as the utilisation rate at the country’s 100-odd factories stood at about 75 per cent.
“The industry is absolutely prepared,” he said. “By simply tweaking the manufacturing process a little bit, we’re home and dry.”