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Kenanga Maintains Forecast on Supermax Following Acquisition of SHCI

KUALA LUMPUR: Kenanga Investment Bank Bhd has maintained Supermax Corp Bhd’s financial year 2024 (FY24) net profit forecast but cut its FY25 forecast by 54% due to losses from its purchase of Supermax Healthcare Canada Inc (SHCI).

The investment bank said Supermax bought the remaining 33% equity interest in the loss-making Canadian unit for RM18.9 million cash, despite already owning a 67% stake.

According to Supermax, the purchase will be paid in cash, financed by internally generated funds and SHCI will become a wholly-owned subsidiary of Supermax once the acquisition is complete

“The RM18.9 million capital outlay will only put a minor dent in Supermax’s RM1.5 billion net cash as of 31 December 2023.

“However, based on SCHI’s RM53 million net loss in June 2023, the additional 33% equity interest will add an RM17 million loss to its bottom line on a full-year basis,” it said.

The research house also expects the group to face a challenging operating environment in subsequent quarters due to massive oversupply.

“The group expects the current challenging operating environment to persist, with a likelihood of a meaningful recovery only sometime in 2025,” it said.

Based on estimates, Kenanga said the demand-supply situation will only start to head towards equilibrium in 2026 – without new capacity coming onstream – and with a 15% a year increase in global glove demand underpinned by rising hygiene awareness, it said.

It noted that rubber glove demand will rise by 30% to 390 billion pieces in 2024 due to 2023’s low base effect and resume its 15% organic growth thereafter.

“This will result in an excess capacity of 212 billion pieces in 2024. Persistent overcapacity means low prices and depressed plant utilisation will continue to plague the industry in 2024,” it added.

The Malaysian Rubber Glove Manufacturers Association projects a 12-15% growth in global demand for rubber gloves annually from 2023, following an estimated 25% contraction to 300 billion pieces last year.

Meanwhile, Kenanga has maintained its target price of 84 sen and ‘market perform’ call on the group.

— BERNAMA

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