Iconic Gloves: Only Time Will Tell

Last week in mid Jan22, Iconic officially launched its RM200mil gloves and face mask manufacturing facility in Batu Kawan.

This facility will house 12 double former gloves dipping lines (capacity 3.3bil per year) and 20 medical face mask production lines (capacity 220mil per year).

It has obtained CCC in early Nov21 and at the time of the official launch in Jan22, 6 nitrile gloves lines have already started running since Dec21.

The rest of the 6 gloves lines and 20 face mask lines are expected to start by Mac22.

Since the end of year 2020, share price of the 7 listed medical gloves companies in Malaysia dropped tremendously as their profits fell due to declining average selling price (ASP).

For new kids on the block who recently diversified into medical gloves manufacturing such as Iconic, their revenues (and probably profits) will grow as the contribution from gloves kicks in.

How will the market value the newcomers? Will their share price drop like the existing gloves counters, or rise due to increasing profit?

What Are Holding Back The Gloves?

Can I still buy Supermax? Should I hold Harta? Careplus has dropped a lot, is it a chance to accumulate? Should I average down on Rubberex? Should I sell Topglove now? Is it a good time to take profit on Kossan? Can I average up on Comfort? How about AT?

There is no doubt that gloves stocks are the hottest stocks in Malaysia stock market since Covid-19 pandemic.

Certain investors will tell you that it's stupid not to buy gloves stocks now, as gloves companies are the only companies that are guaranteed to make gigantic and increasing profits in the near future. 

The advice given is that you must ONLY have gloves stocks in your portfolio.

In early part of Covid-19 pandemic, I think no one would expect Supermax who usually earns around RM30mil net profit a quarter to be able to raise it substantially to RM800mil a quarter.

At this point of time, it's no secret anymore regarding how much glove companies can earn in this pandemic, everybody knows it from their excellent financial reports & forecasts. 

There is also no doubt that gloves companies will continue to make huge profit in the coming few years.

However, it is a different story how the market will value them in term of share price.

Can Small Automation Companies Thrive?

Nowadays people are talking about Industrial Revolution 4.0 (IR 4.0), which is about smart factory with the integration of Internet of Thing, big data analytics, artificial intelligence, automation etc.

Manufacturing businesses will probably lose their competitiveness and be at risk of being eliminated if they do not go for this revolution.

Automation is one of the major component of IR 4.0. It is not a surprise to see that some of the stocks related to automation have posted decent growth in revenue and profit.

Their share price keep on increasing until a PE of more than 50.

Among those solid companies related to automation and robotics are Greatech, Pentamaster and MI. They are fundamentally sound and deserve to have their share price appreciation.

Favelle Favco, an undisputed king of cranes in Malaysia, also diversified into automation business mainly in the oil & gas field in 2018.

There are other smaller automation companies listed in Bursa Malaysia such as Genetec, iStone and AT Systematization.