Yesterday, Adventa (Malaysia's 5th largest glove manufacturer) surprisingly reported 4Q10 net profit of RM11.8 million, up 50.8% year-on-year. According to RHB research, the results were above expectations, mainly because of of a deferred tax write back of RM5.6 million. Excluding the differed tax write back, FY10 net profit would have been RM30.2 million.
|Advent's range of products|
However, profit before tax was lower due to a time lag as only about 70%-80% of the higher costs incurred as a result of rising latex prices and the weakening of the USD against MYR were passed on to customers --- OSK research.
To sweetened the announcement, Adventa also declared a final tax-exempt dividend of 7 sen, which translates into a net payout of 30% and net yield of 3.6%.
As all of the glove counters are in the red this year, experiencing a whopping 30%-40% drops, Adventa's result sure will catch the eyes of investors again. But, Finance Malaysia cautions about it, because Adventa's business model is a little bit different from the other glove manufacturer. Adventa was in a niche position as a manufacturer of surgical gloves, in which the demand is more resilient. Even if Adventa raised the price of its products, it was unlikely to dampened the demand of gloves.
Finance Malaysia do not think that yesterday's result from Adventa is a turn-around indication for other glove manufacturers. And, if the current scenario such as higher latex prices and weakening USD persists, all the glove makers will continue to suffer of margin squeeze.
Due to different assumptions and calculations, OSK raised Adventa's fair value to RM3.80, while RHB lowered their fair value to RM2.21.