SUPERMX: Glove Manufacturer Shows Narrowing Losses and Positive Operating Cash Flow, Rating Upgraded

A leading glove manufacturer recently reported first-quarter FY26 (Jun) results that, while technically below expectations, showed a significant narrowing of core losses and a positive shift in operating cash flow. This operational turnaround has led to an investment bank upgrading its recommendation for the stock.

Performance Review

For the first quarter, the company posted a core loss of MYR14.7 million, a substantial improvement over the analyst and consensus forecast of approximately MYR44 million for FY26F. Revenue for the quarter reached MYR206 million, representing a 33% quarter-on-quarter increase, though a 9% year-on-year decline. The revenue growth was primarily driven by a recovery in sales volumes following gas supply disruptions in the previous quarter and an increase in blended Average Selling Prices (ASPs). This ASP uplift, however, was mainly attributed to a larger mix of US glove sales rather than fundamental pricing power.

Despite the top-line challenges, core EBITDA turned positive at approximately MYR6 million, contributing about 10% of the projected FY26F figure. This positive swing was primarily due to enhanced efficiency at newer production facilities and a reduction in material costs. However, the report highlights that the structurally higher cost base associated with its US operations continues to limit margin scalability.

Future Outlook and Recommendation

Looking ahead, the investment bank has revised its earnings forecasts downwards for FY26-28F, citing anticipated lower utilization rates and a weaker USD/MYR exchange rate, although these revisions are partially offset by upward adjustments to ASP and cost assumptions. Despite this, the positive operating cash flow (pre-working capital) of MYR7.3 million in 1QFY26 signals a potential operational turnaround, alleviating previous concerns about cash burn. The company maintains a strong net cash position of MYR691 million, representing over 57% of its market capitalization.

Given the depressed valuations, with a FY26F Price-to-Book (P/B) ratio of 0.28x (2.8 standard deviations below its three-year historical mean), coupled with its robust cash position and improved operational cash flow, the investment bank sees near-term trading opportunities. The company is also expected to be included in the next Shariah screening cycle in May 2026. The investment bank has raised its recommendation from ‘Sell’ to ‘Trading Buy’, setting a target price of MYR0.43 based on a Discounted Cash Flow (DCF) methodology, which includes a 14% ESG discount.

Key risks to this outlook include stronger-than-expected sales volumes, a stronger USD against the MYR, and lower-than-expected operational costs.