KUALA LUMPUR, Dec 20 — AmBank Research has maintained a “neutral” call on the glove manufacturing sector going into 2018.
In a statement today, it said that the sector's prospects are bright, underpinned by the expanding healthcare sector worldwide as well as the rising hygiene standards across industries that are driving the demand for gloves in the long term.
However, it also warned of a potential supply glut at some point as most manufacturers have stepped up their expansion in recent years.
“With input costs denominated largely in ringgit while export sales in are in USD, glove makers stand to lose from a strengthening ringgit (a reversal from the windfall they enjoyed due to the weakening ringgit in recent years),” the research house said.
AmBank said that its top pick for the sector is Kossan (fair value: RM7.51) because the company was strong in research and development, which translates to product innovation.
It noted too that Kossan is investing in automation to boost its efficiency and cut reliance on foreign labour.
It further noted that Kossan’s earnings have been diversified into a non-glove manufacturing business, namely producing technical rubber products.
