KUALA LUMPUR: Bursa Malaysia-listed glove makers’ shares jumped yesterday as fears mount over a newly identified Severe Acute Respiratory Syndrome (SARS)-like virus spreading globally, as China scrambles to contain the deadly disease that has claimed six lives amid some 300 confirmed cases so far.
Following news that the new strain of coronavirus can be transmitted among humans, the world’s largest rubber glove maker Top Glove Corp Bhd’s share price surged 33 sen or 6.8% to RM5.15 within the first hour of trading yesterday.
The stock was among the biggest gainers on Bursa Malaysia before settling at its one-year high of RM5.11 — still up 29 sen or 6.02% — valuing the company at RM13.08 billion. Trading volume ballooned to 33.28 million, about nine times its 200-day average of 3.76 million.
The interest seen in the glove maker is reminding of when Top Glove’s shares jumped from RM1.56 in March 2003 to as high as RM3.22 in July in that year at the height of the SARS outbreak.
For that financial year ended Aug 31, 2003, Top Glove’s net profit increased 39.8% to RM25.3 million from RM18.1 million for the year before. Its revenue grew 47.1% to RM265.1 million from RM180.2 million.
Similarly, its peer Kossan Rubber Industries Bhd’s share price soared 80% in just one month to RM2.30 in July 2003. Yesterday, the stock finished 24 sen or 5.7% higher at RM4.47, with a market capitalisation of RM5.72 billion.
Hartalega Holdings Bhd and Supermax Corp Bhd also gained, as investors predicted a boost in glove demand in China and worldwide. Hartalega shares rose 25 sen or 4.5% to RM5.80, while Supermax gained 14 sen or 10.7% to RM1.45.
Careplus Group Bhd also advanced in anticipation of higher glove demand, settling two sen or 9.5% higher at 23 sen. LKL International Bhd, a provider of medical and healthcare beds, equipment, peripherals and accessories, benefited from spillover sentiments to close one sen or 5.7% up at 18.5 sen.
Top Glove, Supermax seen as biggest beneficiaries
CGS-CIMB Research analyst Walter Aw said Top Glove and Supermax could be the biggest beneficiaries in this outbreak, as both have excess capacities in the latex segment.
Top Glove’s total production capacity stands at 70.5 billion gloves per annum, while Supermax produces up to 24 billion gloves a year, according to their websites.
However, Aw added that glove makers will only see a sharp rise in global glove demand if the outbreak is prolonged, turning into a global pandemic.
“Based on our channel checks, glove makers under our coverage had yet to witness surging demand for gloves owing to this virus outbreak. We attribute this to the outbreak being very recent, while China does not have a high glove usage per capita due to lower healthcare awareness versus [those of] developed countries.
“We witnessed this during the SARS outbreak in 2003 and avian flu in 2009. We estimate global glove demand rose 12% to 16% in 2003 and 2009 [versus 7% to 9% per annum in 2009 to 2019].
“In the long term, we believe this virus outbreak will lead to higher healthcare awareness especially in emerging countries, in turn boosting glove demand,” Aw said.
Yesterday, China’s National Health Commission announced it had received 291 confirmed cases of Wuhan coronavirus, with 77 new cases reported on Monday, as the virus spreads person-to-person across the central city of Wuhan, Beijing, Shanghai and Guangdong. Japan, Thailand and South Korea have reported cases as well.
The World Health Organization said it will hold an emergency meeting this week to discuss the contagious coronavirus strain, fuelling anxiety due to its connection to SARS that sickened more than 8,000 people and claimed nearly 800 lives in 37 countries almost two decades ago.
In Malaysia, health authorities said they are on high alert following the outbreak in China, and that thermal scanners are used to screen travellers at border points.
http://www.theedgemarkets.com/article/glove-makers-shares-spread-china-sarslike-virus
