RHBInvest Research

Friday, November 18, 2011

Sector Call

Rubber Gloves: Falling Latex Prices = Improving Sentiment Towards Glove Manufacturers Neutral

Sector Update:

¨ Since hitting a peak of RM10.93/kg back in Apr ’11, latex prices have broadly been on a down trend and more recently, saw a significant decline from RM7.55/kg to around RM6.77/kg currently in over two weeks which we believe was due to: 1) concerns over slower global economic growth ahead, which could hamper demand for commodities; 2) the flooding in Thailand could lead to potential disruptions to automotive manufacturers’ operations there, leading to lower demand for rubber; and 3) easing concerns on latex supply issues over in Thailand given that the major tract of the country’s rubber plantation is located in the south.

Malaysia Corporate Highlights

Tan Chong Motor: A Disaster Hit 2011 Market Perform

3Q11 Results

¨ Tan Chong’s 3Q11 results were below our and consensus estimates.

¨ Net profit for the quarter of RM54.6m (-3.4% qoq and +10.6% yoy) brought cumulative 9M11 earnings to RM185.1m (+4.2% yoy) that reached 70.3% of our previous 2011 forecast.

¨ The main reasons for the weaker-than-expected earnings include start-up costs at Nissan Vietnam and othe costs incurred for regional expansion and upgrade of existing facilities.


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