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Singapore Gloves Sector - Maybank Kim Eng 2015-10-21: Privatisation catalyst

Singapore Gloves Sector - Maybank Kim Eng 2015-10-21: Privatisation catalyst RIVERSTONE HOLDINGS LIMITED AP4.SI  UG HEALTHCARE CORPORATION LTD 41A.SI 

Singapore Gloves Sector - Privatisation catalyst 

  • Top Glove’s M&A ambitions and weak MYR triggered a share price rally among Malaysia-listed glovemakers. 
  • Singapore-listed glovemakers Riverstone and UG Healthcare are laggards in the rally, possibly due to slower newsflow and investors being too preoccupied with the penny stocks rally. 
  • Maintain BUY on Riverstone and UG Healthcare. Both stocks are trading at deep discounts to peers (20% for Riverstone and 50% for UG in FY16). Another round of multiple expansions is possible if the rally continues. 


Top Glove’s M&A ambition triggered a rally 

  • Malaysia-listed glove makers ended yesterday with a strong rally, led by Supermax (+12%), Careplus (+10%), Rubberex (+6%) and Top Glove (+5%). We believe that it is driven by Top Glove’s aggressive M&A target and continued MYR weakness (-0.5% yesterday and -2% WTD). 
  • We understand that Top Glove has 3-4 proposals on its table and 1 deal could conclude in the next 6 months. Management is looking at players in the specialty glove and condom space, which will provide diversification to the group. 

Singapore-listed glovemakers are laggards 

  • Share prices of SGX-listed glove makers Riverstone and UG Healthcare have fallen 2-3%, instead of rising along with its Malaysian peers. We believe this could be due to slower newsflow and investors being too preoccupied with the penny stocks rally. 
  • Riverstone and UG Healthcare both fit the bill for Top Glove, as both are differentiated players. 
  • Riverstone dominates the cleanroom segment while UG Healthcare has an established distribution platform and it distributes Top Glove’s products. 

Valuation multiple re-rating likely. 

  • Maintain BUY on Riverstone and UG Healthcare with TP of SGD2.12 and SGD0.41. Both stocks are trading at deep discounts to peers (20% for Riverstone and 60% for UG in FY16). 
  • We think that another round of multiple expansions is possible if the rally continues.


Peer Comparison. 


Singapore Gloves Sector - Maybank Kim Eng 2015-10-21: Privatisation catalyst - Peer Comparison


John Cheong Maybank Kim Eng | http://www.maybank-ke.com.sg/ 2015-10-21
Maybank Kim Eng SGX Stock Analyst Report BUY Maintain BUY 0.41 Same 0.41
BUY Maintain BUY 2.12 Same 2.12


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