Highlights
Social Forum >> Forum Thread
 
 Post Reply   Back  
Page 1

observatory
226 posts

Posted by observatory > Feb 6, 2021 7:03 PM | Report Abuse

Hi Ben. Thanks again for your excellent effort in compiling the relevant info. It’s not a surprise that the US government, regardless of under Trump or Biden, wants to recreate the strategic industries and supply chains at home. This was the reason why the Trump administration pushed TSMC to set up wafer fab in the US.

I continue to pay attention to the global supply situation. This is the annual capacity I’ve compiled earlier for the, may be previously, top 5.

Company (billion) 2020 2021 2022 CAGR (from 2020-22)
Top Glove 90 108 129 20%
Hartalega 41 44 49 9%
Kossan 32 36 43 16%
Supermax 26 36 48 36%
Sri Trang 33 38 49 22%
Total 222 262 318 20%

The expansion rate of 20% per annum is reasonable in my view. However, as discussed last week, I’m most concerned about the aggressive expansion by Intco Medical creating a global supply glut and depress ASP.

Since we last discussed Intco, the company has made yet another announcement yesterday of another 46 billion capacity for medical gloves.

https://vip.stock.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?stockid=300677&id=6894219

Based on my records, Intco has announced close to 284 billion new capacity in the last 12 months. If it could materialize in the next few years, the newly added capacity will be almost 30% large than the top 5 producers in 2020.

5 Feb 2021 46 billion medical gloves, Anhui province
30 Dec 2020 13 billion PVC medical, Henan province
30 Dec 2020 13 billion PVC medical, Henan province
1 Dec 2020 3 billion nitrile medical and 50 billion PVC medical, Shandong
1 Dec 2020 5 billion TPE and 5 billion CPE, Shandong
1 Dec 2020 50 billion nitriles and PVC for medical, Shandong
3 Sep 2020 40 billion medical, Hunan
24 Aug 2020 16 billion medical, Hunan
3 Jun 2020 16 billion medical, Anhui
13 Mar 2020 27 billion medical, Jiangxi

(extracted from company announcements in the link below)
https://vip.stock.finance.sina.com.cn/corp/go.php/vCB_AllBulletin/stockid/300677.phtml

I will closely monitor Intco's progress, especially its recent IPO submission in Hong Kong which, if successful, could give it more ammunition to fund its crazy expansion.


Ben Tan
438 posts

Posted by Ben Tan > Feb 6, 2021 7:31 PM | Report Abuse

Hi observatory, thank you very much for your detailed comment.

I am planning a longer article on the supply-side dynamics, but for now here are a few notes:

Top Glove's latest capacity expansion figures as of yesterday are:

- Right now: 93 billion pieces
- By end 2021: 112 billion pieces
- By end 2022: 136 billion pieces

See: https://www.topglove.com/App_ClientFile/7ff8cb3f-fbf6-42e7-81da-6db6a0ab2ef4/Assets/IR%20Presentation/TG%20Website_English_050221.pdf

For Intco, I am truly skeptical on a lot of their plans or at least on the figures they are releasing for a few reasons:

1) There is currently no existing raw material capacity in the world. Therefore, they have to build everything from scratch, starting from the NBR production facilities, going through the former/mold production, and ending with the entire distribution and logistics network. This will take several years to achieve at the scale they are planning it.

2) I think many of their announcements overlap and/or are unclear. I don't read Chinese, but many of their "announcements" (messages on a message board) are ambiguous. For instance, it is not clear if the Hunan province facilities will produce 16+40 billion gloves, or 40 billion (expanded plan from 16 billion previously). Additionally, it is not clear if this will all be additional capacity, or their plans are simply changing geographically based on where there might be available land for factory setup.

3) Overall, as you mentioned, the total announced added capacity of 284 billion gloves doesn't make any sense, unless they have actually made a direct contract with the Chinese government, which alone will absorb a huge part of this added supply in the coming years.

China suffers from a number of disadvantages as compared to Malaysia, including non-existent raw material production capacity (they are specialized in PVC glove production, not nitrile), much higher gas cost, and much higher labor cost. Thus, they will have to build pretty much everything from scratch, and they will have to work on a much thinner profit margin practically forever. I have no doubt that the Chinese government will aid them in this effort, but I think ultimately the added capacity will be much lower, and their entire effort will be a lot less profitable than they make it look like. There is a reason China hasn't been competing with Malaysia so far in this otherwise very lucrative (for Malaysian companies) business.


bpsiah
74 posts

Posted by bpsiah > Feb 6, 2021 10:11 PM | Report Abuse

Thank you Ben Tan for the insightful write up.


observatory
226 posts

Posted by observatory > Feb 7, 2021 2:24 AM | Report Abuse

Hi Ben, thanks again for your input. I’ve checked again. Apparently, I’ve double-counted some announcements which have in fact superseded earlier announcement with increased capacity. Over the last 12 months, Intco announcements actually focus on these 6 counties:

5-Feb-21 46 billion medical gloves 彭泽县 Anhui
30-Dec-20 13 billion PVC medical 夏邑县 Henan
1-Dec-20 3 billion nitrile medical, 50 billion PVC medical 青州市 Shandong
1-Dec-20 5 billion TPE and 5 billion CPE 沂源县 Shandong
3-Sep-20 40 billion medical 临湘市 Hunan
13-Mar-20 27 billion medical 彭泽县 Jiangxi

The total announced capacity in the 12 month period is therefore 189 billion. Adding its existing capacity of 36 billion, and the 9 billion Vietnam capacity plan announced in 2019, the total is 234 billion. A smaller number, but still very crazy.

The constraint of tools and equipment should be temporary. These things can be produced in non-dedicated facilities that are general purpose, so production ramp-up is easier. Many Chinese vendors also supply latex dipping machines.

I agree there is a real shortage of NBR or Nitrile Butadiene Rubber. As NBR is produced in dedicated petrochemical plants, it will take a while for new capacity to come online. For example, currently LG Chemical has 170,000 ton capacity. Its Ningbo plant in China will add another 100,000 tons in early 2021. But its recently announced cooperation with Petronas Chemical to add another 200,000 ton at Pengerang will only come online in 2023. Market leader Kumho Petrochemical too is adding capacity but also in stages. Nonetheless, if Chinese glove makers were to gain a foothold in the nitrile glove market, more NBR plants might be set up in China. Afterall China already has a thriving petrochemical industry and the necessary infrastructure and technical talents to support new NBR plants.

This is where I believe the glove ASP trend in the next few years will decide whether Chinese producers could steal market share from Malaysians. I agree with you that Malaysian glove makers are lower cost producers. During pre-Covid time, when Malaysian producers have to survive at a net margin of less than 10%, the less efficient Chinese producers will have no chance to get the necessary funding to expand and achieve the scale required to before they can drive down unit production cost.

However, it’s this abnormal time of high ASP that has open up a once in a lifetime opportunity for the Chinese to steal a march on Malaysian. The high ASP is like a rising tide that lifts all boats. As long as ASP does not come crashing down in the next 2-3 years, inefficient players can still make money and survive. This allows Chinese producers like Intco to exploit the rosy ASP picture to aggressively raise funds to expand capacity. Once the Chinese have sufficient scale, the local glove supply chain will naturally emerge there, driving down their cost further and forming a virtuous cycle (for them).

Of course, such reckless expansion could greatly harm glove pricing and is detrimental to all players, the Chinese included. But that’s how the Chinese did it in the past with quite a number of industries, with solar PV being a good example.

That is why I believe it might be in the long term interest of Malaysian glove producers to forgo share buyback and special dividend. Malaysian producers should instead plough back most of their profit to expand capacity even more aggressively and intimidate their Chinese rivals.

This is also the reason that OPEC prefers a stable but not very high oil price. OPEC would forgo short term profit rather than giving their (currently) higher cost competitors (US shale producers) to grow. Malaysian producers could learn from the OPEC lesson -- adopt a long view and flood the market with supplies instead of leaving the initiative to the Chinese!


Sslee
6331 posts

Posted by Sslee > Feb 7, 2021 5:02 AM | Report Abuse

Just a question when pandemic is over will Malaysia Top 4 profit margin revert back to +-10%?


pharker
862 posts

Posted by pharker > Feb 7, 2021 5:41 AM | Report Abuse

There is a lots of dynamics involve here about ASP, and how you define pandemic is over, which could take few years..3 years minimum when herd immunity is reached.

If you say pandemic is over by end of the year, i could only assume you mean infection rates under acceptable level by year end, not pandemic is over. Covid 19 is not a switch, where you can just switch on and off, and target a switch off date. example end of the year, flip the switch, and everything is back to normal.

The fight against the virus does not only depends on vaccines, yes it helps , but a lot of other factors also play an important role. Heath protocols, SOPs, awareness, movement control, border control, all plays an important roles, in addition to vaccines alone.


pharker
862 posts

Posted by pharker > Feb 7, 2021 5:44 AM | Report Abuse

In my opinion, while we try our best to fight covid 19, the battle will not be as easy as many would think. otherwise, US Biden would not ALL OuT, it just shows the challenging task.

After the peak ASP, ASP would fluctuate, sometimes up, and sometimes down, depends on the situation.


Sslee
6331 posts

Posted by Sslee > Feb 7, 2021 8:37 AM | Report Abuse

https://www.livescience.com/worst-epidemics-and-pandemics-in-history.html

This too shall pass.


Abrahmi
19 posts

Posted by Abrahmi > Feb 7, 2021 8:45 AM | Report Abuse

Tq for good reached info. The virus will be with the world for a long time.
New viruses will appear and a new norm of wearing gloves wil be there.
Glove shortages will always be there.


Michael Teng
30 posts

Posted by Michael Teng > Feb 7, 2021 9:07 AM | Report Abuse

Excellent write up. Give everybody a pat on your back.


stockraider
23932 posts

Posted by stockraider > Feb 7, 2021 10:33 AM | Report Abuse

Rubbish analysis loh!!

How could USA increase their own manufacturing capacity benefit supermax & topgloves leh ??

It is definitely negative mah....!!

Yes Supermax setting a plan USA can mitigate the effect loh!!
1. Cost of getting grants & subsidies are low as supermax is a foreign company.
2. Even Supermax can increase USA produce the cost will be high compare to MSIA (btw USA labor cost 8x to 10x} more than msia and supermax export of high margin from msia comprises of over 40% capacity will be substituted with local gloves of 15% to 25% margin mah!

As for topgloves they will lose mkt share in usa about 50% due to product substitute due to " buy america 1st gloves campaign" once capacity is in place loh!


sensonic
494 posts

Posted by sensonic > Feb 7, 2021 11:08 AM |

Post removed. Why?


Ben Tan
438 posts

Posted by Ben Tan > Feb 7, 2021 11:27 AM | Report Abuse

bpsiah, observatory, Sslee, pharker, Abrahmi, Michael Teng, stockraider, sensonic, thank you for your comments.

observatory, yes these figures make more sense, because they talk about added capacity of 117 billion pieces of nitrile gloves. I can see this happening over the next 5-7 years. To make a comparison, Top Glove have plan to increase their capacity by 100 billion pieces to 190 billion pieces by 2025. Hartalega have plan to increase their capacity by 55 billion pieces to 95 billion pieces in 2027. And I believe Supermax's expansion will be a lot larger than the projected 22 billion additional pieces in the next 2 years; for example, the US factory alone will likely yield at least 10 billion pieces per year.

Nevertheless, Intco's movements are very worth monitoring. China is certainly capable of flooding the market with bad quality product, and especially developing countries might suffer from that. However, while China can overcome, in the long run, challenges such as poorer logistics network and more inflexible financial system, the problems with fuel prices and labor costs would still remain, which would mean that with equal technology (provided that's the case), the Chinese companies will always produce equal quality product at more expensive price.

Sslee and pharker, eventually the profit margins will likely normalize, as they do in every industry in the long run. However, this will not happen before 2024 (3 years from now), as evident by the reports of all of the financial analysts.

stockraider, I am happy that you are here. When you spend the time trolling under my articles, I know I am on the right path. So thank you for your confirmation. Regarding your question, although I think it was made clear in the article, in the short run demand far outstrips supply. Thus, nothing will change for anybody, including the Chinese players. The US, as well as every other country, need all the gloves they could get. This includes unbanning Top Glove - hence it will be good for them in the short run, as explained in the article. In the long run the company will most certainly not lose 50% of its share in the US market, because the added capacity in the US covers only about 25-30% of the country's needs. This will likely result in 3-5% loss of revenue for Top Glove in the long run, if any. As explained in the article, Top Glove is one of the companies that will suffer the least from this move, together with Supermax and Sri Trang (Thailand). The companies this may cause more problems to are the China companies, as well as the companies that export predominantly to the US.

As for Supermax, it is certain that producing gloves in the US (or in the UK where they also plan to set up a factory) is more expensive than doing it in Malaysia - that is why the industry has been flourishing here and not elsewhere. However, the US government has mentioned multiple times its commitment to supporting US-based production of PPE, and this is likely why Supermax have decided to set up a factory there. This will result in at least two long-term positives for the company - steady income from US government contracts, and improved relationship for imports even from Malaysian production facilities.


katsul51
304 posts

Posted by katsul51 > Feb 7, 2021 2:23 PM | Report Abuse

Thank you Ben for your excellent work . You never fail us in providing prompt and swift update on glove demand and matters affecting the glove industry. Keep up the good work.


coolinvestor
1185 posts

Posted by coolinvestor > Feb 7, 2021 2:26 PM | Report Abuse

perhaps foreign funds will a whiff of the collaboration between the US govt n supermax to produce gloves in the US.

they may start to come in to supermax in a big way sooner or later.

klse needs more foreign money to make it more vibrant

too much manipulation going on now.

buy at your own risk n advise cheers


dumbdumb123
144 posts

Posted by dumbdumb123 > Feb 7, 2021 2:28 PM | Report Abuse

Even post pandemic, whenever that is, under the new normal circumstances, the usage of gloves will be at least 20% more than pre pandemic. Reason. People are more conscious of personal hygiene etc . Usage in the F n B industry and hotel and tourism industry will increase. Air stewardesses wearing gloves will be a common sight. Etc etc. I just hope our glove companies will maintain their competitive advantage in cost and quality.


observatory
226 posts

Posted by observatory > Feb 7, 2021 2:58 PM | Report Abuse

Ben, thanks again for your view.

China glove makers may not be at a disadvantage as commonly assumed. On the contrary, the financial statements of Intco show its cost structure is as good, if not better than leading Malaysian producers.

A simple way to compare is to look at the operating margin. The operating margin incorporates the factors you’ve cited where Chinese players are assumed to be at a disadvantage. The costs of labor, fuel, transportation, raw material and capital depreciation are already captured in the operating cost. Product quality and distribution network is reflected in the revenue. Poor (good) quality fetches lower (higher) price; hence lower (higher) revenue.

To make the comparison apple to apple (as much as I can), I use the quarterly data from Yahoo Finance website which imposes the same treatment/ definition (this means results differ a bit from company announcements, but not much). Note also each company may have a small non-glove business but the effect is insignificant. While different glove types are sold, a higher operating margin still reflects higher overall product profitability.

I compared Intco against Top Glove and Hartalega (figures in millions of MYR or CNY)

(A) For quarter ending Mar-2020 (Feb-2020 for Top Glove):
Company/ Revenue/ Operating Income/ Operating Margin %
Intco 773 148 19%
Top Glove 1,230 149 12%
Hartalega 778 138 18%

(B) For quarter ending Jun-2020 (or May-2020 for Top Glove):
Company/ Revenue/ Operating Income/ Operating Margin %
Intco 3,676 2,156 59%
Top Glove 1,688 430 26%
Hartalega 920 275 30%

(C) For quarter ending Sep-2020 (or Aug-2020 for Top Glove):
Company/ Revenue/ Operating Income/ Operating Margin %
Intco 4,495 3,087 69%
Top Glove 3,110 1,431 46%
Hartalega 1,346 685 51%

(D) For quarter ending Dec-2020 (or Nov-2020 for Top Glove):
Company/ Revenue/ Operating Income/ Operating Margin %
Intco <results not released yet>
Top Glove 4,759 3,096 65%
Hartalega 2,130 1,347 63%

Source:
https://finance.yahoo.com/quote/300677.SZ/financials?p=300677.SZ
https://finance.yahoo.com/quote/7113.KL/financials?p=7113.KL
https://finance.yahoo.com/quote/5168.KL/financials?p=5168.KL

Note that even by adding another 5% to 10% for Top Glove given its quarterly results lags by one month, Intco's operating margin still outperforms both Top Gloves and Harta. It is this high profitability and superior cost structure that can propel its aggressive capacity expansion.

While it’s possible that Intco’s over 200 billion capacity will only come online much later, the Chinese media expects it to be available by 2023.
https://finance.sina.com.cn/stock/s/2020-12-03/doc-iiznezxs4929762.shtml

My own view is the capacity plan of both Malaysian and Chinese players alike will keep changing. The ASP outlook will determine how much and how fast. If high ASP can be sustained for another 2-3 years, I don’t see what could hold back Intco and in fact other players back from pushing even more capacity as fast as possible to share in the bonanza while it lasts. Ironically this aggressive pursuit of high profit will also plant the seed of price destruction in the future.

Hence my view that Malaysian players should take control and expand aggressively now, even at the expense of sacrificing ASP and margin, so that they don’t lose market domination in the longer term.


Sales
2867 posts

Posted by Sales > Feb 7, 2021 3:23 PM | Report Abuse

Thank you, Ben.


calvin69
164 posts

Posted by calvin69 > Feb 7, 2021 3:25 PM | Report Abuse

You are aware that Intco doesn't just make gloves right? So not apples to apples comparison


Marketsifu
138 posts

Posted by Marketsifu > Feb 7, 2021 3:50 PM | Report Abuse

Simple Supermx or Topglove trend is over!! Unless you can hold until the next pandemic. Many of old generation like this hug this glove being excuse Single PE, Low PE, No reason for drop, good fundamental, future company earn alot. This type of old generations of investing method will kill many people. In this new generation 2020 onwards, NO BODY SEE LOW PE, NTA, GOOD FUNDAMENTAL .. Don't trust those old people teaching method, most of them is outdated. Last time they earn money by looking at good fundamental company. they tot this method still works. Come on, please wake up..

I just started invest in 2020, most of the stock I bought normally Penny Stock, even PN17 I also buy, no profit company I also buy but why I earn alot.. Thanks to God because I understand the trend right now. In year 2020, many new investors join the market, I can said 70% majority fund in Bursa contribute by newbie. You must understand the current market, most of the newbie don't look at good fundamental company. We must follow the trend, they like to goreng we follow. Don't jalan opposite road.

I's so sad when I read some of the old generation people always talk about good fundamental company I feel very sad, they brain wash most of the investors & follow them to Holland.


observatory
226 posts

Posted by observatory > Feb 7, 2021 4:30 PM | Report Abuse

Hi calvin69. Yes, as mentioned in my comment, each company may have a small non-glove business but the effect is insignificant.

In the Intco case, besides gloves, it also produces wheelchairs, hot/ cold packs among other things. However, as of Jun 2020 gloves (classified under PPE category) already contributes more than 96% revenue and even higher profit contribution. Therefore, if other products are excluded, the operating margin from gloves alone should be even higher, albeit slightly.
http://stockpage.10jqka.com.cn/300677/operate/#analysis

Hi Marketsifu. I salute your risk appetite and perhaps skills. But for most people, I included, won’t have a strong enough heart to trade penny stocks, let alone PN17.

Short term trading is a zero sum game. In fact less than zero sum because Bursa and brokerages take a cut. While I agree that some may have insider info or the ability to read charts, I certainly don’t have the skills to win over other people’s money.

That’s why I always invest for the long term the philosophy is about sharing the fruits of growth. To be successful, company fundamentals and valuation (though PE is not a good indicator here) are equally important. Both Top Gloves and Hartalega have excellent fundamentals and superior management.

My back and forth discussion with Ben concerns only valuation, or more specifically how the future ASP trend will determine future profits (or cash flows discounted to today values), and therefore whether the stock is under/overvalued at the current price.


observatory
226 posts

Posted by observatory > Feb 7, 2021 4:56 PM | Report Abuse

To add to my previous comment, this is how I see the combination of fundamental + valuation quadrants in investing.

1) Good fundamentals + cheap valuation --> Price will catch up in next few quarters, at most the next 2-3 years. Very comfortable to hold.

2) Good fundamentals + expensive valuation --> Near term upside is limited. May have a hold a lot longer. Risk of disposing at a loss when occasional sell down happens

3) Poor fundamentals + cheap valuation --> Potentially a value trap. Pray for the price to recover fast before company fundamental deteriorates further

4) Poor fundamentals + expensive valuation --> Like buying lottery. Don’t bet your house.

No doubt some market players are not bound by the above rules. Insiders and quant funds are among the exception. But how many retail investors have their advantages (not to mention insider dealing is illegal)?


wbwanabe
197 posts

Posted by wbwanabe > Feb 7, 2021 4:57 PM | Report Abuse

Tks Ben for another excellent article. I find your analysis to be unbiased and way better than many paid analysts working in investment houses. If you do not mind, pls do share your other portfolios with me (ehem...via PM). Would love to follow what you buy:)


Ben Tan
438 posts

Posted by Ben Tan > Feb 7, 2021 6:05 PM | Report Abuse

katsul51, coolinvestor, dumbdumb123, observatory, Sales, calvin69, Marketsifu, wbwanabe, thank you very much for your comments.

observatory, unfortunately I suffer from the great disadvantage of not being able to read Chinese. Google Translate is frequently no help, so I am mostly blind as far as Intco's reports are concerned. I am eagerly waiting for their HK listing so that I could read their reports in English. It will definitely be important to understand how Intco - practically a newcomer in the industry (they were selling PVC gloves only) is able to work at a great return on sales level. It is possible that they get certain incentives/help from the Chinese government for instance, which cannot continue in perpetuity. The bottom line is that labor and fuel, with other things equal, are more expensive to them (in the case of fuel - significantly more expensive). There are only two ways for them to have overcome these challenges:

1) Their level of automation and general technology to be much better than that of the Malaysian players;

2) The government to be subsidizing them in some significant way.

As Hartalega's facilities are broadly regarded as the gold standard for glove production, I doubt it's the first reason.

I completely agree with you that expansion plans will be adjusted in accordance with the corresponding demand. Hence, I don't think further expansion from the big Malaysian players might be merited. My opinion is that Intco are overinflating their numbers in order to attract investors. The way they issue the notes on their expansion plans certainly doesn't sit well with me, and if I were an investor looking at the company, I would be truly wary unless some additional information on how exactly they are planning to achieve this super-expansion is provided.

Marketsifu, thank you for letting us know about the sudden change in trends. Fortunately, this is not the first time that such a change has occurred, and if we judge from the previous few times, it will not end well for the "new" trend. Gambling is gambling, and sooner or later things return to their rightful places.

wbwanabe, I can tell you here, hopefully for the benefit of others as well, although I don't necessarily advise that people follow my strategy. I liquidated all of my other holdings, and I currently hold only glove companies in my stock portfolio. I did that, because I currently see very little upside potential in any other sector. There are bright rays of sunshine here and there, but having in mind the holding period required for them to get materialized, and having in mind that gloves are readily available for investment to any Malaysian investor, it is hard to justify buying anything else right now.


observatory
226 posts

Posted by observatory > Feb 7, 2021 9:42 PM | Report Abuse

Hi Ben. I’ve searched for Intco company announcement in English on Shenzhen Stock Exchange website, but there are only restricted to a few items with brief descriptions (select ChiNext, stock code 300677)
http://www.szse.cn/English/disclosures/announcements/index.html

Detailed announcement to the stock exchange is still in Chinese:
http://www.szse.cn/disclosure/listed/notice/

In the Chinese development model, the local government governments offer both implicit and explicit subsidies to manufacturers. Local governments provide cheap/ free land, industry park, infrastructure, tax incentives, cheap credits (though state-controlled banks). Since the opening up by Deng, local governments all over China have been fighting over each other to attract investment. GDP growth is a key KPI for local officials’ promotion so they have their self-interests at stake. I won’t comment on whether it’s fair or unfair. After all many American states also fight over each other to attract investments. But for China this has been a very successful development formula.

That explains why all the capacity announcements I shared earlier contain legal agreements between Intco and respective local governments. For example, in the agreement with Jiangxi 彭泽县 county, the government is responsible to deliver 800 acres of land acording to Intco’s specification. The land is priced at only CNY40,000 (RM25,000) per acre. In comparison, last year Hartalega paid RM 263 million for 38 hectares of land at Sepang, or RM2.77 million per acre. So Intco get its land at less than 1% of Harta’s cost!

http://www.szse.cn/disclosure/listed/bulletinDetail/index.html?05bdcdcb-ca2c-4db4-9e07-741fded2df81

More to that is the county government is also responsible for the electricity, water, wastewater, gas, telecommunication and other infrastructure; and provide a series of incentives. Of course, in return Intco is obliged to start production within 15 months, and to achieve annual export sales exceeding CNY3 billion in 5-year time, among other conditions.

Like you, I also suspect these multiple new capacity announcements are rushed out partly with its Hong Kong Stock Exchange listing in mind. Timing is most important. Currently, glove companies have a good story to tell -- raging pandemic; uncertainty in vaccine rollout; demand outstrip supply; secular growth …

If ASP weakens before Intco can list, it will raise a lot less money, thereby constraining its expansion. However, if it's lucky and ASP remains very strong, Intco can easily tap into an abundant amount of hot money. Just for comparison, Kuaishou Technology, the HKEX hot IPO this week attracted CNY1.3 trillion capital and 1,200X oversubscription.

But the ironic thing is, if the history of other Chinese companies is of any guide, an Intco that is flush with new money will soon go on a spending spree. It will build so many new capacities until the market is saturated and enters another round of shakeout.


paperplane
21321 posts

Posted by paperplane > Feb 8, 2021 12:39 AM | Report Abuse

This is same situation like last time, when all tyre comecfrom Asia, they use chemical built a fake human made rubber. And plan to dominate globally using tht.


stockraider
23932 posts

Posted by stockraider > Feb 8, 2021 8:11 AM | Report Abuse

Gloves is just like any other commodities, when there are shortages, its price will shoot up sky high & everybody make alot of monies happily loh!

After that alot of new people will jump into the bandwagons attracted by the profits the current players make, the price will then fall back to normalcy due big supplies and profit will be at a moderated level loh!!

It is quite a normal basic economic price cycle that we cannot avoid loh!!

The best strategy is leave early when u still have the chips advantage, when alot of people still greedy at the table loh!!


CCCL
620 posts

Posted by CCCL > Feb 8, 2021 9:13 AM | Report Abuse

Better put more focus on the driver of the the company. Leadership will determine the success of that particular company in the near future. Any super profit now is nothing extraordinary, even a monkey can mange it during this pandemic period.


Ben Tan
438 posts

Posted by Ben Tan > Feb 8, 2021 11:29 AM | Report Abuse

observatory, paperplane, stockraider, CCCL, thank you for your comments.

observatory, thank you very much for this information. I've been meaning to read up more on the public-private relationship system in China in regards with entrepreneurship, specifically in the manufacturing sector. I will most certainly have to do that soon. I think Intco's announcements make logical sense, but I also think none of this is sustainable. If the Chinese local government KPI system is indeed based around achieving growth at all cost, then it makes perfect sense why they would be chasing head over heels to get Intco to open factories. In any case, in my view there isn't much that the Malaysian company can do to prevent this, and as we know the Malaysian government doesn't have a similar style policy. I think Top Glove and Supermax (in particular) are already expanding as aggressively as possible having in mind all the constraints of doing honest business.

paperplane, the future is certainly in synthetic rubber, so this is not particularly good news for the Thai producers in the long run. That is why we believe any major threats will come from China.

stockraider, I now start to see the pattern of trolls. One of the things trolls keep repeating is that gloves are commodity. The fact is that glove production is a growth business - the reason why all the major glove manufacturers have been trading at 30-40 PE over the past more than a decade.

CCCL, I agree that management capabilities are the most important factor in (almost) every business. I don't agree that "even a monkey" could manage the situation during a pandemic period. On the contrary, exactly in extraordinary times it is easiest to see which company's management is most capable, nimble and cunning.


Bamboo Green
835 posts

Posted by Bamboo Green > Feb 9, 2021 7:00 PM | Report Abuse

Demand is not a problem, but seem many new guys rush to venture into this industry & all existing players rush to build new lines, expect supplies will flood the market sooner within one year


teck
92 posts

Posted by teck > Feb 11, 2021 10:37 AM | Report Abuse

Health Minister Datuk Seri Dr Adham Baba had previously said the Government was looking to give 210 shots per day in each location nationwide.If it goes well, 120,000 injections can be carried out daily at all 600 vaccination centres.

 Post Reply   Back  
Page 1
APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Earn MQ Points while trading with MQ Traders Group
MQ Affiliate
Earn side income from MQ Affiliate Program
 
 

438  423  589 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 DNEX 0.86+0.005 
 AVI 0.17+0.06 
 SERBADK 0.605-0.035 
 ITRONIC 0.21+0.03 
 DNEX-WD 0.325+0.02 
 VIZIONE 0.195-0.01 
 PWF-WA 0.055+0.005 
 SCOMI 0.05-0.005 
 YGL 0.27+0.01 
 SERBADK-WA 0.085-0.015 

FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
PARTNERS & BROKERS