Riverstone & UG Healthcare - CGS-CIMB Research 2020-11-20: Rubber Gloves – Strong Fundamentals Remain Intact

RIVERSTONE HOLDINGS LIMITED (SGX:AP4) | SGinvestors.io RIVERSTONE HOLDINGS LIMITED (SGX:AP4) UG HEALTHCARE CORPORATIONLTD (SGX:8K7)

Riverstone & UG Healthcare - Rubber Gloves – Strong Fundamentals Remain Intact

  • We remain positive on the fundamentals of glove makers following a session with industry group MARGMA at InvestSG this week.
  • MARGMA expects global glove demand to grow by another 15-20% in 2021F (2020F: 360bn pcs) and sees an ongoing glove shortage situation.
  • Post Covid, MARGMA expects ASPs to stabilise with better supply-demand dynamics. Yet, ASPs could remain 50-60% above pre-Covid levels by 2023.



MARGMA reiterates positive view on glove sector

  • We hosted the Malaysian Rubber Glove Manufacturers Association (MARGMA) at our InvestSG event this week, where we discussed the opportunities and challenges facing the Malaysian glove sector post-COVID-19.
  • MARGMA remains upbeat on prospects for the sector, and expects global rubber glove demand to reach 360bn pieces in 2020F, followed by a further 15-20% growth to c.440bn pcs in 2021F. Even with the COVID-19 pandemic fully under control, MARGMA sees sustained growth in the coming years, with
    1. the need to replenish glove inventory levels especially in neglected sectors (industrial, F&B, electronics, etc.), and
    2. increased glove usage given higher hygiene awareness.


Glove shortage situation could persist in 2021F

  • Currently, due to the supply shortage situation, order lead times for gloves have risen to 8-10 months, compared to 1.5-2 months pre-COVID-19. Despite the accelerated pace of capacity expansion by existing glove players and new industry entrants, MARGMA believes the global glove shortage situation will still persist in 2021F.
  • MARGMA notes that while global glove demand has surged in recent months, capacity growth will take time to catch up, as setting up a production line takes between 1 and 1.5 years.


ASPs could remain 50-60% above pre-COVID-19 levels by 2023

  • MARGMA notes that glove industry contractual ASPs at current are about US$70-80 per thousand pcs of gloves, some 200% higher than pre-COVID-19 levels (c.US$25). Amid the strong glove demand and rising raw material costs, glove companies are seeing a further price hike trend in the coming months.
  • MARGMA thinks that while pricing will eventually stabilise in tandem with better demand-supply dynamics, this will be a gradual process, and estimates that ASPs could still remain c.50-60% above pre-COVID-19 levels by 2023.

Strong fundamentals remain intact; reiterate ADD on UG Healthcare, Riverstone






ONG Khang Chuen CFA CGS-CIMB Research | https://www.cgs-cimb.com 2020-11-20
SGX Stock Analyst Report ADD MAINTAIN ADD 2.500 SAME 2.500
ADD MAINTAIN ADD 1.700 SAME 1.700



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