Talking about the glove industry, I’m sure you already know who are the big boys . But today, we are sharing an analysis on one of the underdogs in the glove industry – COMFORT GLOVES BERHAD (2127). 🧤
Before moving into the snapshots, here are some of their fundamentals for your easy reading:-
- Business Nature.
COMFORT engaged in manufacturing and trading of synthetic premium specialty glove and natural rubber gloves. 🧤🧤
2018 Revenue breakdown 👇
85% – Synthetic Premium Specialty Glove
15% – Natural Rubber Glove
- Key Financial Ratios (Latest Year and 10 Years CAGR)
- Revenue (2018) 421.17 Million / 13.34% 👍
- Net Profit (2018) 35.90 Million / 29.49% (Only available from 2010 – 2018, since 2009 they are making losses.) 👍
- Net Profit Margin (2018) 8.52% / 11.53% (Only available from 2010 – 2018, since 2009 they are making losses.) 🤷🏿♂️
- ROE (2018) 14.60% / 8.925 (Only available from 2010 – 2018, since 2009 they are making losses.) 👍
- Dividend (2018) 1.0 cents per share / No historical dividend record 🤷🏿♂️
- Net Asset Per share (2018) 0.4375 cents per share / 16.15% 👍
- Current P/E 20.14 👌
- Comments on Financials of COMFORT
i. High growth prospect, mostly double digit growth rate 😱😱
ii. Reasonable PEG (Price / Earnings Growth Rate) = 0.68, which means you pay RM 0.68 for per RM 1 growth on earnings
iii. Lower profit margin than peers, which are averaged around 15%-17%
iv. Not suitable for dividend investor, as company is on rapid expanding stage which could incur high CAPEX, and minimal dividend return
- Technical Prospects 📈📉
- On a YTD basis, COMFORT is outperforming the FBMSCAP benchmark.
Down 26.75% (COMFORT)
Down 32.16% (FBMSCAP)
- High amount of “smart money” flowing into COMFORT again, by it’s key director keep absorbing shares. However, currently the stock is being dumped by small investors.
- Price hitting the lower Bollinger Band, which could see panic selling in short term prospect.
- Entered distribution stage for a very long period, perhaps it’s the typical “wash out small investors” act by the big players.
- Key Risks
- Currency Risk
36% of COMFORT’s revenue are derived in USD form. Therefore, every 1% movement in USD/MYR would inflict 9.15% of movement in their net earnings, given all other variables are unchanged.
However, the key management team are seeking to reduce the risk by shifting more sales to Malaysia recently to diversify their customer portfolio.
- Sector Risk
There are some news reportedly claim that the glove industry’s demand is slowing down. COMFORT’s sales are closely tied with nitrite glove, which seeking customer diversify their usage to premium synthetic gloves.
Having a narrower margin in this industry certainly hurts when supply is topping, and perhaps this is one of the core reason for COMFORT to be “cheap”. 🤔
- Macro Economical Risks
Again, old stuff. Trump trade dispute with China and global GDP slowing down would haunt all manufacturing sector.
These are some photos on comparison against benchmark, smart money flow, and accumulation and distribution stage.
Leave your comment below if you need any additional information! 😄😄