SUPERMX: Glove Manufacturer Reports Deeper Losses Amid Operational Headwinds
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.43 (-11.5%) |
| Last Traded | RM0.49 |
| Recommendation | SELL |
A prominent glove manufacturer recently announced a core net loss of MYR56 million for the fourth quarter of FY25, contributing to a total core loss of MYR121.7 million for the full fiscal year. These results significantly underperformed the investment bank’s expectation of a MYR98 million loss, prompting a downward revision in the target price and a reiterated “SELL” recommendation.
Performance Review and Underlying Factors
The disappointing performance in 4QFY25 saw the company’s topline weaken by 24% quarter-on-quarter, primarily attributed to a confluence of operational and market factors. Key among these were disruptions in natural gas supply, leading to a two-week production halt. Sales volumes were further impacted by intense competition, heavy frontloading activities by Chinese glovemakers in early 2025, and customer order deferments amid ongoing tariff uncertainties. A weaker USD against the MYR also played a role in exacerbating the losses.
Operational Challenges and Future Outlook
Looking ahead, the investment bank remains cautious regarding the company’s path to profitability, particularly given its substantial fixed costs. The US Texas plant, for instance, has only commissioned Phase 1, representing a mere 2.4 billion pieces of capacity, while the remaining 16.8 billion pieces sit idle, incurring ongoing fixed maintenance expenses. With no immediate resolution to the prevailing industry oversupply, the full commissioning of the Texas plant’s remaining capacity is not anticipated in the near term. Further pressure on profitability is expected from the upcoming implementation of mandatory Employees Provident Fund contributions for foreign workers in October, alongside increased Sales & Service Tax (SST).
Despite the challenging environment, the investment bank projects a sequential narrowing of core losses. This is contingent on the inventory adjustment period concluding by June/July, which is expected to facilitate a recovery in sales volume during 1QFY26. Nevertheless, full-year FY26F-FY27F core loss forecasts have been slashed to MYR44-12 million from previous estimates, with a modest return to profitability only projected for FY28F.
Analyst Adjustments and Rating
Based on these adjustments, the investment bank has revised its Discounted Cash Flow (DCF)-based target price downwards to MYR0.43 from MYR0.54. This new target price implies a 0.3x FY26F Price-to-Book Value (P/BV), which is 2.8 standard deviations below its three-year historical mean of 0.5x, reinforcing the “SELL” recommendation.
