KUALA LUMPUR — The less volatile natural rubber latex prices will lead to earnings re-rating for Supermax Corp Bhd as a result of better margins and higher demand.
In a note yesterday, CIMB Investment Bank Bhd (CIMB Investment Bank) said the stable costs would enable Supermax to pass on a higher portion of its costs to customers, clawing back lost profits when raw material costs were on the uptrend.
“Currently, Supermax is passing on 75 per cent of the cost increase, higher than 70 per cent passed in the second quarter.
“In normal conditions, Supermax is able to pass on 90 per cent of the cost increase,” it said.
CIMB Investment Bank said the less volatile raw material costs would entice distributors to restock their inventories.
“We gather that inventories are at an all-time low of one-two months due to the recent wild swing in the rubber prices,” it said.
Meanwhile, in a separate note, Nomura Equity Research said Supermax’s strong performance in the third quarter ended Sept 30, 2011 would allow it to remain in a fairly solid position financially to weather the cost headwinds unlike the smaller, unlisted companies. — Bernama