Supermax Corp Bhd’s powerful share price rally has surely produced many millionaires in town, had they cashed out in time.
Supermax saw the biggest-ever jump on its share price in 2020 when the coronavirus was spreading fast globally. From 60.1 sen, the stock price climbed to RM3.81 — more than six times, between March 31, 2018, and March 31, 2020.
For an investor who bought one million Supermax shares at end-March 2018, the value of the investment would have been worth RM3.81 million from RM601,000.
In addition, Supermax declared regular dividends each year in The Edge Billion Ringgit
Club’s (BRC) review period between 2018 and 2020.
The glove maker declared a dividend of eight sen per share in the financial year ended June 30, 2018 (FY2018) and 1.5 sen in FY2019. On top of that, Supermax also undertook share dividend distribution in FY2019 and FY2020, which turned out to be a better form of reward, as its share price rose to fresh peak in the second half of 2020.
Supermax distributed one treasury share for every 65 existing ordinary shares held then. Some 20.88 million treasury shares were distributed at the cost of RM1.09 per treasury share.
For FY2020, the group gave shareholders one treasury share for every 45 existing shares held.
With that, Supermax shareholder return grew at a compound annual growth rate of 87.2% over three years.
Thus, Supermax has once again bagged The Edge BRC award for the highest return to shareholders over three years in the healthcare sector — its second consecutive win.
The company’s profit was already on the rise pre-pandemic for the three-year period of FY2018 to FY2020. It posted profit after tax of RM110.14 million in FY2018, which grew to RM123.10 million in FY2019 and RM534.78 million in FY2020. Annual revenue expanded from RM1.30 billion in FY2018 to RM1.54 billion in FY2019 and RM2.13 billion in FY2020.
FY2021 proved to be an even better year as global demand for rubber gloves swelled. Supermax’s net profit surged to a record high of RM3.81 billion as its annual revenue hit an all-time high of RM7.16 billion.
The ramp-up in production output and allocation of a larger percentage of its capacity to direct sales to end-users allowed the group to capture strong market share and improved profitability amid soaring global demand. This enabled the group to register a strong performance each quarter since the onset of the pandemic, according to its FY2021 annual report.
On prospects, noting that average selling prices (ASPs) of gloves are gradually moving back to pre-pandemic levels, Supermax says the demand for gloves continues to be strong, owing to the structural changes that have taken place in the markets, with heightened hygiene and healthcare awareness among users.
Nonetheless, US Customs and Border Protection imposed an import ban on Supermax’s products because of allegations of forced labour.
For the long term, the group says the glove industry is optimistic that rubber glove demand growth can be sustained, owing to positive factors such as a growing population, a rising number of countries imposing tighter healthcare regulations, increasing health and hygiene awareness, the lack of a viable alternative to disposable gloves and the huge growth potential in large and growing economies such as India and China, where per capita spending on healthcare still lags behind developed countries.
Kenanga Research analyst Raymond Choo Ping Khon says the sanction is negative to Supermax and is likely to affect its earnings, considering that the US commands premium ASPs and accounts for 20% of sales.
“The severity to earnings depends on how fast Supermax can replace loss of sales in the US and how long it takes for the group to resolve the issue. Note that it took almost a year for Top Glove Corp Bhd to be cleared of the ban,” Choo says in a client note dated Oct 22.