Supernormal Rubberex riding on exceptionally high gloves demand

Rubberex Corp Bhd may see a “supernormal growth”, riding on the spike in demand for gloves in light of Covid-19, said RHB Investment Bank Bhd.

RHB Investment expects Rubberex to register a three-year forward compound annual growth rate earnings growth of 30 per cent.

This would be supported by the group’s aggressive but timely expansion of the nitrile disposable gloves segment, buoyed by exceptionally high demand for gloves globally, it added.

“The company plans to double its capacity in the nitrile disposable segment from the current one billion pieces per annum to two billion pieces in the next three to six months.

“By end-financial year 2022, we expect its production capacity to triple to three billion pieces per annum,” RHB Investment said in a report today.

Rubberex’s production capacity for household gloves is currently 52 million pieces a year, while industrial gloves stand at 25 million pieces.

RHB Investment said Rubberex would benefit directly from Covid-19 and was trading at an unwarranted 40 per cent discount versus peer average.

Rubberex’s operations facility is running at close to full utilisation rate of 90 per cent, compared to its normal level of 80-90 per cent before the pandemic.

“The most direct beneficiary is the nitrile disposable gloves segment as it is sold mainly to the medical sector.

“The spill-over effect has also benefited the household/industrial gloves segment due to increased health awareness across the world due to Covid-19.

“We also expect margins to expand due to higher US dollar/ringgit trend and lower nitrile butadiene prices,” it said.

RHB Investment initiated coverage on Rubberex with a target price of RM1.68.

Source: NST