KUALA LUMPUR: Shares of Supermax Corp Bhd extended their decline in late morning on Tuesday, Nov 9 after it announced a set of lacklustre third quarter earnings.
At 11.38am, it was down 11 sen to RM4.30 with about 1.0 million shares done. The FBM KLCI was 1.4 points higher at 1,521.24.
CIMB Research said it was maintaining its Buy on Supermax. It added that though the earnings for the nine months were at 90% of its forecast, Supermax's annualised nine-months results were below its expectations though in line with consensus.
'Despite the earnings shortfall, we continue to rate Supermax a BUY. Our target price remains at RM7.82, still based on 11.0x P/E or a 20% discount to our target CY12 P/E of 13.8x for Top Glove,' it said.
CIMB Research said it had underestimated the latex price volatility and further weakening of the US$ during the period.
'We now reduce our FY10-11 EPS forecasts by 6% but leave FY12 unchanged as latex prices should moderate over the longer term and demand for Supermax's glove products should stay strong,' it said.
The research house said potential re-rating catalysts are a) the eventual moderation of latex prices as weather patterns normalise, b) accelerated take-up of natural rubber medical gloves in emerging economies where hospitals and clinics operate at subpar hygiene standards, and c) a recovery of Supermax's distribution income.
At 11.38am, it was down 11 sen to RM4.30 with about 1.0 million shares done. The FBM KLCI was 1.4 points higher at 1,521.24.
CIMB Research said it was maintaining its Buy on Supermax. It added that though the earnings for the nine months were at 90% of its forecast, Supermax's annualised nine-months results were below its expectations though in line with consensus.
'Despite the earnings shortfall, we continue to rate Supermax a BUY. Our target price remains at RM7.82, still based on 11.0x P/E or a 20% discount to our target CY12 P/E of 13.8x for Top Glove,' it said.
CIMB Research said it had underestimated the latex price volatility and further weakening of the US$ during the period.
'We now reduce our FY10-11 EPS forecasts by 6% but leave FY12 unchanged as latex prices should moderate over the longer term and demand for Supermax's glove products should stay strong,' it said.
The research house said potential re-rating catalysts are a) the eventual moderation of latex prices as weather patterns normalise, b) accelerated take-up of natural rubber medical gloves in emerging economies where hospitals and clinics operate at subpar hygiene standards, and c) a recovery of Supermax's distribution income.
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