‘It’s a multi-year story for glove makers, not just a blip’

The craze for rubber glove shares amid the COVID-19 pandemic is nowhere near the end just yet, said Maybank Kim Eng.

The strong interest, the research outfit added, is not just a simple cyclical phenomenon, but a structural step up for the sector in terms of demand as well as pricing.

“It is a multi-year story for the glove makers, and not just a blip,” said Maybank Kim Eng head of regional equity research Anand Pathmakanthan.

He said that while the cyclical element to the rubber glove sector is obvious, the market may have missed that the sector also has a structural element to it.

Speaking at Maybank Kim Eng’s Invest Asean 2020 virtual conference today, Anand said with COVID-19 cases being reported unabated across the world, there will continue to be a need for rubber gloves.

This leads to a spike in demand for the product, he said, adding: “This then results in higher utilisation and better economy of scale and definitely a lot better pricing power.

“What the market has missed is the structural flow through from what has happened. The world will never be the same again, especially the healthcare sector,” said Anand.

“People are going to be much more cautious about treatments and what medical equipment they use going forward to ensure that contagion does not happen again and gloves are going to be an essential part of that,” he said.

Anand noted that many parts of the world have been slow in getting onto the rubber gloves bandwagon or are satisfied with low quality gloves or vinyl gloves.

But now, they are scrambling to upgrade and increase the volumes of gloves they buy, he added.

Source: The Edge Markets