• Rubber: Incentives to boost business

Rubber was another commodity which has also been highlighted in November, whereby it was reported by Bernama that the Primary Industries Ministry will conduct a study on the Rubber Production Incentive (IPG) floor price, which is currently set at RM2.20.

According to Bernama, Kok said the government has proposed to allocate RM50 million under the 2019 Budget to implement the IPG to help smallholders and rubber tappers, but has yet to determine its floor price.

“The problem is the quantum, the floor price, which is RM2.20, and the ministry will be conducting a study to see if it should remain at RM2.20 or increase it.

“We need to calculate the number of rubber tappers who are eligible for the incentive, so this will take a bit of time.”

Later on during the month, Kok revealed an initiative to stabilise rubber prices and increase productivity, in which the government had allocated RM100 million for the use of the cup-lump modified bitumen technology in the construction of roads in port and industrial areas.

“In addition, planters and smallholders are encouraged to cultivate mixed cropping so that they would have an alternative revenue stream during the Monsoon season,” she said.

As per DOSM’s October 2018 statistics, natural rubber (0.3 per cent of total exports) decreased RM9.2 million or 2.8 per cent y-o-y to RM314.7 million due to the 15.4 per cent decline in average unit value as export volume increased 14.9 per cent.

Looking at the rubber gloves sector, Kenanga Research noted that the just concluded 3QCY18 results of glove makers under its coverage came in within expectations.

Kenanga Research further noted that Hartalega Holdings Bhd’s 3Q18 results showed a declining sequential volume for the first time over the past several quarters potentially indicating that strong demand is tapering off.

As for Kossan Rubber Industries Bhd’s 3Q18 results, these were a solid indication of a strong growth trajectory in subsequent quarters with the commercial production of plant 16 and plant 17, the research arm said.

“Our analysis suggests a potential oversupply situation is looming. Note that previous two oversupply occurs back in 2014 and 2016.”

Meanwhile, Affin Hwang said that apart from Karex Bhd, all the glove manufacturers within its coverage delivered positive y-o-y growth.

“We believe that the earnings growth momentum for the glove manufacturers can be sustained, benefiting from strong demand from the switch from vinyl gloves to latex/nitrile gloves.”