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Trying to Make Sense Bursa Investments

Author: Ben Tan   |   Latest post: Fri, 4 Jun 2021, 12:59 PM

 

Supermax, Top Glove, Hartalega, Kossan: Retailers Throwing, Institutions Collecting

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Last week I shared data from the CGS-CIMB weekly fund flow report that showed local institutions were major buyers of glove stock, while retail investors were major sellers (especially of Top Glove and Supermax) (see here). The trend has persisted during this past week (19-23 April), and with retailers throwing and institutions collecting glove stocks.

Below are the net fund flows by glove stock per market participant group (net flow in million RM):

  Top Glove Hartalega Supermax Kossan
Local Institutions 165.0 168.4 98.9 (46.1)
Retail Investors (44.8) (4.9) (73.9) 12.1
Foreign Institutions (82.3) (180.7) (7.4) 20.1
Nominee Investors (30.7) 15.3 (14.1) 20.7
Proprietary Investors (7.2) 1.9 (3.5) (6.8)

A couple of notes on the fund flows:

- There has been a major reshuffling of holdings between local institutions and foreign institutions, with local IBs selling Kossan and buying Hartalega, while the foreign IB fund flow was in the opposite direction.

- It is important to note that behind the "nominee investor" flows usually lie retailers, especially when the volumes are small. Thus, retailers were actually net buyers of Hartalega and Kossan, while they were selling heavily Supermax and Top Glove.

As the short position on Top Glove is by far the largest, this development doesn't bode well with the major short seller of gloves. If my suspicions are correct, at least part of the stock that has been shorted in the last 2 months comes from nominees. As discussed here, nominees can lend part of the shares held under their accounts without the need for an approval of the underlying nominee account holders. However, they likely have internal policies of lending only a specified percentage of the stock held in their accounts. If retailers are net sellers of a stock via their nominee accounts, the nominee will be forced to recall the stock from the short seller, triggering buying pressure by the short seller.

An additional note is that I have a strong suspicion a certain popular "stock picker" has gone short on the glove stock, around the time it started moving upwards.

Important disclaimer: Any views expressed are for informational and discussion purposes only. None of this information is intended as, and must not be understood as, a source of advice. It is imperative that you always do your own research and that you make any decisions based on your personal situation and your own personal understanding.

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Related Stocks

Chart Stock Name Last Change Volume 
TOPGLOV 4.72 -0.08 (1.67%) 16,441,100 
SUPERMX 3.71 -0.11 (2.88%) 13,195,300 
HARTA 8.30 -0.12 (1.43%) 7,653,400 
KOSSAN 3.61 -0.01 (0.28%) 2,988,800 

  10 people like this.
 
speakup when glove shares drop, everybody talks about Vaccine, lower ASPs, Windfall Tax, ESG.
when glove shares rise, everybody forget about Vaccine, lower ASPs, Windfall Tax, ESG.
27/04/2021 9:35 PM
Sales People are funny, glove stock so much cash nobody wants. Those stock not much profit a lot of people chasing.
28/04/2021 1:21 PM
Citadel9999 glove so.much cash but dividend so little!!!
28/04/2021 1:47 PM
MF0001 U MUST BE JOKING

RETAILERS THROWING?

RETAILERS CAUSE ALL THE DROPS?

U MAKE UNKER LAUGH LERH

:DDDDDDDDDDDDDDDDDDDDDDDDDDDDDDD
28/04/2021 2:38 PM
Ben Tan speakup, Sales, Citadel9999, thank you for your comments.

While I agree with you, just a note that even if a company has a lot of cash, we have to see what it would do with it and how it would/could utilize it. Of course in the case of (most) Malaysian glove manufacturers, it may be relatively simple to calculate the excess cash that could potentially be distributed to shareholders.

I will give Supermax and Top Glove as examples.


Top Glove

1. Cash within next 5 years: RM28 billion
- Cash on hand = RM4 billion
- Estimated raised on HKEX = RM4.2 billion
- Estimated net profit 2HFY21 = RM7 billion (70% dividend)
- Estimated net profit FY22 = RM5.8 billion (50% dividend)
- Estimated net profit FY23 = RM3.1 billion (50% dividend)
- Estimated net profit FY24 = RM2.3 billion (50% dividend)
- Estimated net profit FY25 = RM1.6 billion (50% dividend)

2. Total announced capex = RM10 billion

That's approximately RM14 billion leftover for dividend payouts. Of this, the confirmed payout, based on the special dividend of 20% for FY21 and on the company's 50% dividend payout policy, is RM11.3 billion. There will be estimated of RM2.7 billion unallocated funds, which I believe could be distributed as special dividend. For instance, if extra 20% dividend is distributed for FY22 to FY25 (i.e. the dividend payout for the next 4 financial years is 70%), that would be RM2.56 billion - close to the leftover.


Supermax

1. Cash within next 5 years: RM13.85 billion

- Cash on hand = RM3.6 billion
- Estimated net profit CY21 = RM4.9 billion
- Estimated net profit CY22 = RM3 billion
- Estimated net profit CY23 = RM1.4 billion
- Estimated net profit CY24 = RM0.5 billion
- Estimated net profit CY25 = RM0.45 billion

2. Total announced capex = RM3.6 billion
- Malaysian factories = RM1.39 billion
- US factory = RM2.2 billion

That's approximately RM10.25 billion leftover for dividend payouts. In fact, the company can cover its announced capex with the cash on hand it has, and any future profits can be distributed as dividend fully. The company doesn't have a dividend payout policy though.
28/04/2021 2:57 PM
patrico8 Solid fundamentals dont lie. Cash in hand already justify a better current price rate.
28/04/2021 3:01 PM
Mat Cendana For investors, one simply must have a glove counter or two in his portfolio. Although some analysts talk about ASP dropping, more players etc., these glove companies are in a very cosy position. And this will remain in the foreseeable future.

They have been turning in very impressive profits over the past few quarters. Kossan for instance had reported a monster first quarter last week, and this current second quarter should also be very good. And this company isn't too stingy when it comes to dividends.

Anyway, I've decided to just ignore the daily price action and not think too much about these `reduced ASP', short sellers and such. For as long as the environment remains positive for glove companies, I'm putting most of my investment capital into these counters.
28/04/2021 6:07 PM
zzzz52 @Ben, thanks for the calculation on the estimated cash excess. It would be a good reference.
29/04/2021 7:44 AM
Bgt 9963 Good morning...!
29/04/2021 8:47 AM
meistsk3134 today market off. go eat char sieq
29/04/2021 8:56 AM


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