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The gloves kingdom has been minting new billionaires

The gloves kingdom has been minting new billionaires

It’s
been a good year for glove companies and their founders.

Malaysia,
a country that produces about 65% of the world’s supply for rubber gloves, now
counts at least four billionaires whose fortunes were made in the industry,
including two new ones this year alone. Thai Kim Sim of Supermax Corp was the
latest to join the club, with a net worth estimated at about US$1 billion at
the stock high earlier this month, according to the Bloomberg Billionaires
Index.

A
jump in demand due to the coronavirus outbreak has propelled shares of
companies making protective gear, suddenly turning the Southeast Asian nation
into a hotspot for creating ultra-wealthy individuals within the sector. Top
Glove Corp, the world’s biggest maker of the product, Hartalega Holdings Bhd
and Kossan Rubber Industries Bhd have all benefited. But with a fivefold jump,
Supermax’s ascent has been particularly notable this year.

“It
has become a new norm to wear gloves for various purposes, including medical
and retail, and the high usage will benefit their makers in the long term,”
said Walter Aw, an analyst at CGS-CIMB Research. “Supermax is a very
interesting story. It does its own brand manufacturing, while others are mainly
suppliers.”

Thai
founded Supermax with his wife in 1987, starting it as a business trading latex
gloves before venturing into manufacturing in 1989. It became the first
manufacturer to come up with its own glove label, Supermax, in response to the
government’s call to brand Malaysian products. The company now exports to more
than 160 countries and meets 12% of the global demand for latex examination
gloves, according to its website.

Thai
and his direct family members own 38% of Supermax, according to company
filings. He declined to comment for this story.

Just
like social distancing and temperature checks, wearing protective equipment has
become the norm with the virus pandemic that has already killed more than
430,000 people worldwide. Global demand for rubber gloves could grow 11% to 330
billion pieces this year, two-thirds of which is likely to come from Malaysia,
the country’s rubber glove manufacturers association estimates.

Glove Powerhouse

The
Southeast Asian nation became a glove powerhouse in the 1980s, when demand
began to surge with the AIDS epidemic. Thanks to low labor costs, Malaysian
entrepreneurs were able to set up shop. The country’s plantations of rubber
trees — British colonists introduced the plants originally from Brazil in the
1870s — and its large oil industry help provide local manufacturers supplies to
make the protective equipment.

Top
Glove has more than tripled this year, lifting the net worth of its founder,
Lim Wee Chai, to US$2.5 billion, according to Bloomberg calculations excluding
the value of his pledged shares. The company reported a 366% surge in net
income to a record RM348 million (US$81 million) for the three months through
May, with sales also reaching an all-time high. Its executive director said in
an analyst briefing Thursday that “the best is yet to come,” with a “more
spectacular performance” for the quarters to follow.

Local
rivals Hartalega and Kossan Rubber have seen their stock double in 2020. That’s
pushed the value of the Hartalega stake held by founder Kuan Kam Hon and his
family to US$4.8 billion, including shares indirectly owned through holding
companies. Kossan Rubber’s Lim Kuang Sia, who’s now worth US$1.1 billion, also
became a new billionaire this year.

Exponential Surge

But
with a 394% stock surge in 2020 through Monday, Supermax’s ascent is
unparalleled. The company reported a 24% increase in revenue to RM447 million
for the three months through March, party driven by an “exponential surge in
demand due to the Covid-19 pandemic,” it said in its quarterly release. The
company churns out 24 billion gloves annually and is looking to expand that to
44 billion by 2024, according to its 2019 annual report. It bought additional
land to increase manufacturing capacity this month.

Thai’s
rise to a billionaire hasn’t come without controversy, though. He has appealed
against a 2017 conviction for an insider trading offense he allegedly committed
in 2007. He was sentenced to five years in jail and fined RM5 million for
communicating non-public information about APL Industries Bhd, a company
Supermax gained control of in 2005 that was delisted in 2009.

While
most analysts are positive on Supermax — eight of the 10 tracked by Bloomberg
recommend buying the stock, and none advises to sell — some are saying
Malaysian glovemakers are at risk should countries such as China expand their
production, according to a Maybank Investment Bank Bhd report by Lee Yen Ling
last week. Their shares gave up some gains on Monday, with Supermax losing 13%
for its biggest slump since August 2018. It regained 7.4% at 10:50am in Kuala
Lumpur.

But
for now, Supermax remains a favorite. The fact that the company manufactures
its own brand of gloves means it may be able to sell at higher prices directly
to end-customers, according to CGS-CIMB’s Aw, who expects the industry boom to
last past the immediate effect of Covid-19.

For
Kenanga Research analyst Raymond Choo Ping Khoon, too, Supermax has more good
days ahead — not just because of the “abnormal demand and acute supply tightness,”
he wrote in a June 10 note, but also thanks to the “scrupulous execution of its
expansion plans.” And the recent land acquisitions showed the company’s
commitment toward future growth, the analyst said.

Source: Bloomberg 

Posted on : 16 June 2020
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