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After more than one year of expected lower ASP, share price should have factored in by now , or not yet ?
Since UG share price is 10% below its Net Assets it may not drop much. Traders could give it a push after collecting cheaper . Earnings even in this lower glove priced market is pretty good , but I find management too conservative with dividends ! They can easily try to give out dividends in shares.
UG Healthcare' s H1FY22 net profit slides 61% on lower selling price, production volumes
Glove maker UG Healthcare Corp' s net profit for H1 FY22 tumbled about 61 per cent year-on-year to S$21.2 million as a lower average selling price (ASP) and softer production volumes affected its performance.
Revenue was down around 26 per cent at S$117.3 million due to the lower ASP of gloves, delays in shipments to key markets, customers holding less inventory amid declining the ASP and lower production volumes. The lower production volume came about as the pandemic resulted in the temporary closure of manufacturing facilities and a mandated 60 per cent workforce capacity at its manufacturing operations in Malaysia.
Earnings per share stood at 3.45 Singapore cents, shrinking from 9.05 cents a year ago.
Gross profit decreased by 55.1 per cent to S$44.6 million in 1H FY22 on the back of the lower ASP for products and higher fixed overheads linked to increased production capacity. As a result, gross profit margin fell from 62.2 per cent in 1H FY21 to 38 per cent in 1H FY22.
Share of losses from associates came to S$0.5 million, versus a profit of S$1.8 million previously, owing to losses reported by its German and the USA associates.
Production capacity at its manufacturing operations is currently 3.4 billion pairs of gloves per year. The temporary halt of construction activities in Malaysia between June and September last year led to a delay in additional production capacity coming onstream. A new manufacturing facility will start production in May 2022 and will lift total production capacity to 4.6 billion pairs of gloves per year.
Lee Jun Yih, executive director of UG Healthcare, said: " Despite intense competition and lower ASP, the group remains confident to achieve better financial performance compared to pre-Covid times as heightened hygiene awareness is likely to continue to drive demand for disposable gloves."
He added that UG Healthcare will continue to seek diversification in non-glove business opportunities in the healthcare related sector, leveraging on its downstream distribution infrastructure and capabilities.
In October, it launched a new range of proprietary branded reusable gloves for users in the heavy industry, such as chemicals, railway and energy.
No dividend was declared or recommended for 1H FY22 as the group said it plans to conserve cash for expansion and growth. In the corresponding period a year ago, it declared a special dividend of S$0.00105 per share.
This one is self inflicted isnt it? If they never sell for super normal profits during crisis, the non-malaysian forces also wont want to expand their manufacturing to localise glove production as a strategic consideration. If this is the case, malaysian private producers will be up against foreign state owned enterprises who dont care about zero or negative margins for a strategic product? Just take the losses as buying insurance for the next pandemic?
Rubber products sector supernormal earnings on final legs
The anticipated normalisation of earnings for the rubber products sector has begun as the supernormal earnings are in their final legs, says RHB Group Research analysts.In a Sept 28 note, analyst Sean Chew maintains " neutral" on the rubber products sector, with a " neutral" recommendation on six out of the eight regional stocks covered as the expectation of average selling price (ASP) moderation has been largely priced in.
The selling prices of rubber gloves have fallen from the highs, with current ASPs of nitrile and latex gloves ranging between US$40 to US$45 and US$30 to US$35 respectively per 1,000 pieces.
Due to this, RHB is trimming its normalised price assumption per 1,000 pieces to US$27 for nitrile and US$21 for latex. This is based on the expectations that prices will revert back to the cost-plus basis, says Chew.
" Glove capacity expansion plans are dependent on supply and demand dynamics, which in turn determine selling prices. Listed glove manufacturers under our coverage are expected to expand their production capacity to 319 billion pieces per annum by 2023.
" Given the quicker-than-expected price erosion, we believe glove makers may decide to scale back on their expansion plans to prevent the risk of oversupply and suboptimal utilisation rates," says Chew.
However, if non-Malaysian manufacturers proceed with their aggressive expansion, the Malaysian manufacturers would suffer in market share loss. This may result in the latter reacting by continuing their expansion and possibly under-pricing their products, says Chew.
" Additionally, manufacturers are likely to prioritise clearing their high-cost inventory when ASPs trend south, with prices overshooting downwards before settling at a higher equilibrium. As such, prices could fall below our expectations and pose a margin compression risk to our forecast," he adds.
RHB believes that a steeper price war resulting in prices falling to cost-efficient levels could prompt a further sector de-rating.
By collating publicly announced expansion plans by various manufacturers and conducting a supply and demand analysis, RHB found that an oversupply scenario is unlikely to happen for the next two years. The dynamics, however, may be close to parity in 2023.
Given the sharp moderation in share prices recently, RHB believes the aforementioned factors have largely been accounted for, with domestic institutions heavily reducing their exposure for the past few months.
" That being said, we have yet to see value or catalysts to rerate the sector and the balance of risks still remain tilted towards the downside," says Chew.
In the Malaysia space, RHB favours Top Glove, given its entrenched market leadership. Additionally, Top Glove' s exposure to latex gloves (49% of FY21 sales volume) points to lesser price competition versus its pure-nitrile peers.
In the Singapore space, the firm likes Riverstone, as the downtrend in healthcare glove ASP will partly be cushioned by its higher-margin cleanroom segment which continues to enjoy demand arising from the growing tech manufacturing and pharmaceutical sectors.
RHB maintains Riverstone at " neutral" with a new target price of 95 cents, representing a 4% upside. The firm' s analyst cut its FY22F to FY23F earnings by 71% and 55% after revising its ASP assumptions.
The firm also incorporated a 2% environmental, social and governance (ESG) discount to its target price, as RHB' s proprietary methodology found that Riverstone' s ESG is below the country mean.
RHB also remains " neutral" for UG Healthcare, with a lower discounted cash-flow-derived target price of 37 cents. After revising its ASP assumptions, the RHB analyst slashed its FY22F to FY23F earnings by 27% and 18%. The firm ascribed a 6% ESG discount to the target price as UG Healthcare' s ESG stands below the country mean.
With Muhyiddin staying on as interim PM guess not much change till an election is held
Maybe the Medtecs effect. UG is the " smallest" listed glove stock in SGX....so the waves can rock this boat more easily....my personal opinion.
Richardlai ( Date: 16-Aug-2021 09:55) Posted:
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Looks like the Malaysian political uncertainty is affecting the market, May have to lie even lower
lie low for the momment,,,,,,
Let us await the results, guess nothing much will happen till then. Larger buyers would want to see what is the status ... even though they expect it to outperform
ug healthcare day
day conversion 570 must hold
then w3 675 continue
day conversion 570 must hold
then w3 675 continue
Next week results and hopefully a good dividend declared. Hoping for 3 cents dividend.
Someone must have given it a booster jab ! Keep it up.... need to consolidate and leap up next week.
up 4.5%.....
the way this virus is running wild is quite a concern ..... even in a safe haven like Singapore ! Very fishy the KTV butterflies and the Fisher mongers !
I think we can see a run up next week ! There could be more collection first.
We are seeing people passing quicker than before: What hospitals look like in US Covid hot spots
By Christina Maxouris, CNN, July 14, 2021
Dr. Sergio Segarra says when Covid-19 patient numbers in the Miami hospital he works in dipped below 20 last month, he began feeling optimistic.
I remember seeing articles in the news about hospitals in California with empty Covid units and I longed for that experience, Segarra, the chief medical officer with Baptist Health' s Baptist Hospital, said. It' s an experience we were working our way towards that unfortunately has taken a rather sad turn.
I remember seeing articles in the news about hospitals in California with empty Covid units and I longed for that experience, Segarra, the chief medical officer with Baptist Health' s Baptist Hospital, said. It' s an experience we were working our way towards that unfortunately has taken a rather sad turn.
In the weeks since, the hospital' s Covid-19 patient numbers have more than tripled, and staff are now treating more than 70 people, an " exponential growth," he said, that they were not expecting. To accommodate the climbing patient numbers, the hospital recently reopened two units that were previously shut down.
The overwhelming majority of those coming in sick with Covid are unvaccinated, Segarra said. Many are young -- people in their 20s and 30s who are getting " extremely, extremely sick" and some of whom are dying....
https://edition.cnn.com/2021/07/13/us/us-covid-hot-spots-hospitals/index.html
https://edition.cnn.com/2021/07/13/us/us-covid-hot-spots-hospitals/index.html
Covid cases are surging again in Latin America and the U.S., WHO officials warn
https://www.cnbc.com/2021/07/14/covid-cases-are-surging-in-latin-america-and-the-us-who-officials-warn-.html
Other glove stocks are improving so UG should follow as well. This stock is smaller so may have less participation by bigger funds.
UK reports 42,302 COVID cases, highest since Jan. 15
https://uk.investing.com/news/economy/uk-reports-42302-covid-cases-highest-since-jan-15-2416673
I see the suffering even in Malaysia and Indonesia of the Covid Patients ...very bad and sad. Seems terrible !