KUALA LUMPUR, April 23 (Bernama) — The latest outbreak of bird flu (H7N9) in China could improve sentiment towards natural rubber players, according to RHB Research.
In a research note today, RHB Research highlighted the possibility of a surge in demand should the H7N9 outbreak develop into a pandemic.
It also maintained a “buy” call on Top Glove and Supermax as both companies would be the prime beneficiaries of a fall in latex prices and be well positioned to capture the additional demand arising from a possible H7N9 pandemic.
It said the RHB Research channel check revealed that most glove companies had experienced higher order enquiries, although most of this had yet to be translated into purchase orders.
“Consequently, our fair value for Top Glove and Supermax has been raised to RM7.11 (RM6.42) and RM3.30 (RM2.68), based on an unchanged target price earning ratio of 15.5 times and 13 times respectively,” it added.
RHB Research has also maintained an “overweight” call on the sector.
Meanwhile, Hwang DBS Vickers Research in its research note said the H7N9 outbreak, would probably not trigger demand for rubber gloves immediately.
“It would take three to six months before any visibility in volume growth can be seen,” it added.
Hwang DBS Vickers said it continued to like Kossan for its attractive valuation of nine times price earning and an earnings growth of 15 per cent in the financial year 2014.
“Moving forward our valuation base to 2014, we are revising our target price for Kossan at RM4.50 with a ‘buy’ call, for Top Glove at RM5.90 with a ‘hold’ call and Hartalega at RM5.50 with ‘hold’ call too,” it added.