Month: July 2022

Malaysia: Medical glove manufacturers see surge in orders due to COVID-19, amid forced labour concerns

Rubber glove manufacturers in Malaysia – the world’s biggest producer of medical gloves – are reporting a surge in orders from Europe and the US as a result of the COVID-19 pandemic, including firms previously linked to exploitation of migrant workers and allegations of forced labour, passport confiscations, illegal withholding of pay and restricted freedom of movement.

In March 2020, the US lifted a ban on disposable rubber gloves made by WRP Asia Pacific, which it had enacted last September over forced labour allegations. The US said the company is no longer producing the rubber gloves under forced labour conditions.

In the UK, the NHS has recently bought 88.5million medical gloves from Supermax. Last year, workers in Supermax facilities in Malaysia reported paying excessive recruitment fees to agents, passport confiscations, working 12 hours per day for up to 30 days without rest, poor working and hostel conditions, and wage deductions for speaking out against working conditions. Supermax denied the claims. 

Migrant activists have warned forced labour in Malaysia’s medical glove industry is likely still rife, while the International Labour Organization has indicated there could still be elements of forced labour. Activists are calling on governments importing medical gloves from Malaysia to uphold their modern slavery commitments to ensure protection for the workers producing rubber gloves to fight the COVID-19 pandemic.

Glove stocks’ sharp price fall: Analysts say valuations appear attractive but ‘wait for more clarity

KUALA LUMPUR (June 24): Public Investment Bank Bhd said on Friday rubber glove manufacturers’ valuations appear attractive following the sharp fall in their share prices as the global Covid-19 situation appears to have come under control as countries reopen their international borders.

However, Public Investment research team’s key message to investors is “wait for more clarity” from the Malaysian rubber glove sector, which is closely watched as a beneficiary of the Covid-19 outbreak which started in early 2020, as demand for rubber gloves, seen as a crucial piece of personal protective equipment, jumped to curb the global spread of Covid-19.

Covid-19-driven demand for gloves is however now seen normalising as global vaccination progress leads to anticipation that the Covid-19 outbreak can be curbed.

Such sentiment is already reflected in share prices of major glove manufacturers — Top Glove Corp Bhd, Hartalega Holdings Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd.

“Given the recent sharp fall in share prices, valuations of companies under our (Public Investment) coverage appear to be attractive. However, we suggest investors wait for more clarity on the stabilisation of ASPs (average selling prices) as well as for the normalisation of supply and demand,” Public Investment’s research team wrote in a note.

At Bursa Malaysia on Friday (June 24), Top Glove’s share price closed unchanged at RM1.05, Hartalega’s settled up four sen or 1.46% to RM2.78, Supermax’s finished up one sen or 1.17% to 86.5 sen while Kossan’s settled up two sen or 1.52% to RM1.34.

Glove manufacturers’ share prices rose on Friday after Health Minister Khairy Jamaluddin said on Thursday (June 23) he thought a new wave of Covid-19 infections in Malaysia would happen earlier than the government’s current predictions.

“I think perhaps the wave will be earlier than our current predictions. For instance, cases today (Thursday, June 23) have exceeded 2,700, previously we were at a level of 1,000 to 2,000 cases but has exceeded 2,000 cases in the last two or three days,” Khairy was quoted by Bernama as telling reporters after officiating at the Otorhinolaryngology service and Sleep Lab at Rembau Hospital in Negeri Sembilan on Thursday.

Shares prices of Top Glove, Hartalega, Supermax and Kossan, which have been adjusted for their respective bonus share issues, have fallen sharply to current levels from levels seen during the critical phase of the Covid-19 outbreak, which began in early 2020.

On Aug 21, 2020, Top Glove closed at RM9.33, Hartalega finished at RM17.74, Supermax ended at RM10.95 and Kossan closed at RM8.20.

On Friday, Public Investment said it does not think the improving Covid-19 situation will cause a significant drop in rubber gloves’ consumption as glove demand should remain elevated above pre-Covid-19 levels due to the expected increase in glove demand from emerging markets with low per capita consumption besides rising hygiene awareness globally.

“Reopening of economies should further spur the demand of gloves from non-medical sectors. [Glove] Demand is expected to grow at between 10% and 15% per annum as compared to 8%-10% pre-pandemic,” Public Investment said.

Other key factors to consider include the impact on glove manufacturers from costlier raw materials and a weaker ringgit against the US dollar, according to Public Investment.

Taking into account that raw material prices make up the biggest portion of glove makers’ costs, any delay in cost pass-through will further erode profit margins of these companies, Public Investment said.

“As [glove] supply growth outpaces demand growth, glove makers might also have to sacrifice margins to absorb part of the higher raw material costs in order to stay competitive,” Public Investment said.

Meanwhile, the weaker ringgit against the US dollar is expected to benefit the rubber glove makers as their sales are mostly denominated in US dollar, according to Public Investment.

“However, as some of the raw material costs are also quoted in US dollar, this would partially offset the positive impact arising from a stronger US dollar,” Public Investment said.

The ringgit weakened past 4.4 against the US dollar for the first time since the onset of the Covid-19 pandemic in March 2020 on May 19, 2022 in anticipation of US interest rate hikes to fight inflation.

At the time of writing on Friday (June 24, 2022), the ringgit was traded at 4.4025 against the US dollar. Over the last one year, the exchange rate was between 4.1275 and 4.4235.

For now, rubber glove manufacturers, which theedgemarkets.com spoke to, appear to be taking the new operating landscape in stride.

As a glove company puts it, the glove sector has been “hit hard” as global glove demand normalises in tandem with easing Covid-19 concerns.

“Glove supply is more than demand for the time being,” the company said.

Public Investment, which covers Top Glove, Hartalega and Kossan under the glove sector, said on Friday that due to the recent sharp fall in share prices of glove companies under its coverage, valuations of these companies appear to be attractive in price-to-earnings (PE) ratio terms based on their closing share prices on Thursday (June 23, 2022).

Based on 2022 earnings, Public Investment said Top Glove’s PE ratio stood at 30.9 times, while those of Hartalega and Kossan stood at 2.9 times and 8.7 times respectively.

Public Investment said it has a target price (TP) of RM1.07 for Top Glove shares while the TPs for Hartalega and Kossan stood at RM4.92 and RM1.72 respectively.

Join Avecena Gloves at MIACES 2022 Expo

join-avecena-gloves-at-miaces-2022-expo

The Malaysia International Agricommodity Expo & Summit (MIACES) is an event designed to help advance the agricommodity sector. The event includes a conference, exhibition, roundtable discussions, business meetings, and awards night. It is designed to bring together all the industry players, producers, investors, and other stakeholders to share their products, latest equipment and technology.

The objectives of this event, as outlined by MIACES are:

  • To promote Malaysia as the international hub for agricommodity activities
  • To introduce and fortify Malaysia’s standing as the leading producers of agricommodity products internationally
  • To enable MIACES as an international trade expo whereby Malaysian exhibitors and their products will gain maximum exposure in the agricommodity sector globally
  • To provide a global marketplace for greater level transactions
  • To showcase eye opening innovations and technology made locally and internationally
  • To develop a conducive business development environment in which business opportunities and investments are enhanced in the agricommodity sector
  • To offer MIACES as the best platform for local exhibitors and visitors to explore business potentials globally

Don’t forget to visit our booth to learn more about our company.

In the meantime, you can check out MIACES 2022 Official Website for More info: https://myagricommodity.com/

Back to News: https://avecenagloves.com/corporate/news/

Back to Home: https://avecenagloves.com/