KUCHING: Supermax Corporation Bhd (Supermax) plans to increase the nitrile glove mix to about 30 per cent by gradually converting its existing natural rubber powder-free production lines to nitrile lines.
Currently, Supermax produces a mix of 80 per cent natural rubber gloves and 20 per cent nitrile.
OSK Research Sdn Bhd (OSK Research) understood that about 70 per cent of all its lines were convertible, except for the remaining 30 per cent, which were dedicated for the production of natural rubber powder gloves.
The research house pointed out that this change in product mix was in tandem with the more stable demand for nitrile gloves.
OSK Research understood that management also intended to increase its current production of about 20,000 pairs per annum (p.a) to 2.5 million p.a by end-2011.
This was in line with its plan to gradually tweak its product mix towards higher margin gloves.
As mentioned before, management expected to increase its total capacity by 3.1 billion pieces of gloves by end-2010 and another 4.1 billion at end-2011, bringing its annual capacity to 21.7 billion pieces by end-2011.
The research house noted that management anticipated latex prices to peak at about RM8.50 per kilogramme (kg) at end-2010 followed by a fall in the first quarter of the financial year 2011 (1QFY11) despite the fact that rubber trees would be undergoing their winter season.
This was because management believed the current price run-up was fuelled by speculation rather than being due to actual shortage.
OSK Research’s target price for the company was RM7.84 per share based on a price earnings ratio of 13 times financial year 2011 (FY11) earnings per share (EPS).
Going forward to FY11, management expected a net profit growth of about 20 per cent, contributed by higher associate contribution, the establishment of more regional distribution centres and the production of higher margin examination gloves.