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Thursday, September 5, 2013

Hot Stock: Supermax surges for 2nd day on upbeat analyst reports, weak ringgit, valuation

Hot Stock: Supermax surges for 2nd day on upbeat analyst reports, weak ringgit, valuation

Written by Jeffrey Tan of
Thursday, 05 September 2013 15:57

KUALA LUMPUR (Sept 5): Supermax Corporation Bhd saw its share and warrants rise sharply for the second consecutive day, after more analysts recommend a “buy” on the undervalued stock.

The glove stock rose by as much as 21 sen or 8.5% today. Yesterday, it rose 13 sen or 5.5% to close at RM2.46 per share.

The sharp fall in the ringgit vis a vis the US dollar is a positive for the company and the rubber glove sector in general, as export sales are denominated in dollar.

Supermax is also credited for having built a strong own brand manufacturing (OBM) presence and the stock price is seen as undervalued by 40% by a research firm.

At 3.36 pm today, Supermax share rose 19 sen or 7.7% to RM2.65, with volume of some 12 million shares. It was the fifth top gainer.

Dancing along with Supermax were its structured warrants. At 3.30 pm,SUPERMX-CM rose 11.5 sen or 109.5% to 22 sen with trades of 62 million units. It was the second top active counter.

“The big quantum change in Supermax’s share price is mainly due to the
weakening of the ringgit against the US dollar and as a result, its warrants rose too,” said senior remisier Goh Kay Chong over the telephone.

In a note today, Kenanga Research highlighted that Supermax will be a beneficiary of the weakening ringgit since the group did not hedge its US dollar receipts.

The research house said it likes the glove producer because it was trading at 10.5 times FY14 earnings per share (EPS) compared to its average 14% net profit growth over the next two years.

It added Supermax’s year to date share price performance (up 20%), was still lagging behind other players such as Kossan (up 90%) and Hartalega (up 40%), it said.

“We maintain outperform rating on Supermax with target price (TP) of RM2.82 based on twelve times FY14 EPS,” said Kenanga.

Meanwhile, TA Research said in a note yesterday that the glove producer had strong OBM presence, which made up 69% of sales mix.

“We are confident Supermax’s marketing capabilities will help ensure new capacities are utilized as and when they arrive,” said TA Research.

The research house has reiterated its ‘buy’ call on Supermax, with unchanged TP of RM2.90.

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