Last Friday I noticed Supermax had posted its 2nd quarter result for FYI 2009. I was surprised that Supermax was able to complete filing its 2nd quarter result which was just ended 2 weeks ago at 30 June. I told myself it must be some good result from the quarterly result so the company would like to announce it as soon as possible.
When I took a glance on the annoucement, I immediately realised that the net profit of the 2nd quarter was almost double the size of the net profit on y-o-y basis. The net profit of 2nd quarter also grown at a pace of 31% as compared to the preceding quarter.
By achieving a net profit of RM25.7 million, it has far exceeded my original expectation on the net profit of the 2nd quarter should be around RM21 million to RM22 million. So I further calculate some relative ratios and comparing the forward P/E of Supermax to other glove companies that listed at Bursa Malaysia.
The following information indicates the annualised forward P/E ratios of the 4 main glove companies that listed at Bursa Malaysia:-
Top Glove -> 12.67 times
Kossan -> 11.17 times
Harta -> 8.79 times
Supermax -> 5.04 times
According to the comparison that I have done, it is concluded that Supermax was far cheaper than other 3 glove companies in terms of relative valuations. Since it has spin off APLI and trying to reduce debts and also able to achieve a better net profit margin (which stood at around 14% at the latest quarter), I believe the cost of capital to Supermax should be lower now and thus increasing its P/E ratio. Unless there is a situation to justify Supermax with lower P/E if its sales growth rate was lower to the peers, and apparently it is not the case.
If Supermax’s P/E ratio should be at least parallel to Harta’s P/E at 8.79 times, not mentioning if it should be valued as high as Top Glove at 12.67 times, its share price should be at least RM3.45 (= RM1.96 * 8.79/5.04). The closing share price of Supermax’s at last Friday was RM1.96. According to my estimation, Supermax is underestimated by 44% (=[3.45 – 1.96]/3.45), or put it another way to say that it will have a chance to appreciate up to 76% (=[3.45 – 1.96]/1.96).
In view of the above information, I decided to acquire additional Supermax’s shares yesterday. I tried to bid the shares at RM1.96 but I was informed by the broker that the share price was push up until RM2.1 since the market open at 9 a.m. It is not surprised to see that there were such a huge demand for Supermax’s shares, so I revised my bid price to RM2.1 and I was able to close the deal with 7,600 units of Supermax’s shares.
When I took a glance on the annoucement, I immediately realised that the net profit of the 2nd quarter was almost double the size of the net profit on y-o-y basis. The net profit of 2nd quarter also grown at a pace of 31% as compared to the preceding quarter.
By achieving a net profit of RM25.7 million, it has far exceeded my original expectation on the net profit of the 2nd quarter should be around RM21 million to RM22 million. So I further calculate some relative ratios and comparing the forward P/E of Supermax to other glove companies that listed at Bursa Malaysia.
The following information indicates the annualised forward P/E ratios of the 4 main glove companies that listed at Bursa Malaysia:-
Top Glove -> 12.67 times
Kossan -> 11.17 times
Harta -> 8.79 times
Supermax -> 5.04 times
According to the comparison that I have done, it is concluded that Supermax was far cheaper than other 3 glove companies in terms of relative valuations. Since it has spin off APLI and trying to reduce debts and also able to achieve a better net profit margin (which stood at around 14% at the latest quarter), I believe the cost of capital to Supermax should be lower now and thus increasing its P/E ratio. Unless there is a situation to justify Supermax with lower P/E if its sales growth rate was lower to the peers, and apparently it is not the case.
If Supermax’s P/E ratio should be at least parallel to Harta’s P/E at 8.79 times, not mentioning if it should be valued as high as Top Glove at 12.67 times, its share price should be at least RM3.45 (= RM1.96 * 8.79/5.04). The closing share price of Supermax’s at last Friday was RM1.96. According to my estimation, Supermax is underestimated by 44% (=[3.45 – 1.96]/3.45), or put it another way to say that it will have a chance to appreciate up to 76% (=[3.45 – 1.96]/1.96).
In view of the above information, I decided to acquire additional Supermax’s shares yesterday. I tried to bid the shares at RM1.96 but I was informed by the broker that the share price was push up until RM2.1 since the market open at 9 a.m. It is not surprised to see that there were such a huge demand for Supermax’s shares, so I revised my bid price to RM2.1 and I was able to close the deal with 7,600 units of Supermax’s shares.
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