| • When a sector starts to turn up, it's usually an interesting time to pick stocks. If Maybank KE is right, the time has come for the gloves sector which is why it has upgraded the sector to "Positive". There are 3 key glove companies listed on SGX and a bunch more on Bursa Malaysia. • Meanwhile, Maybank KE would like you to consider the largest "cherries" it has identified that are looking promising in 2024. Read what its head of research in Singapore has to say below ... |
Excerpts of Maybank Kim Eng report
| Cherry picking in Singapore |
Analyst: Thilan Wickramasinghe, Head of Research Singapore
Thilan WickramasingheFour major themes are converging:
(1) more corporate restructurings,
(2) sustainability inflows,
(3) regional M&A and
(4) productivity boost from new technologies.
These could give Singapore earnings a further boost.
Investors may need to be more selective in 2024. We think companies linked to these themes as well as stocks that lagged from high rates and large inventories should outperform.
For themes, we like DBS, ComfortDelGro, Dyna-Mac, SingTel, and laggards CLAR (CapitaLand Ascendas Reit), CICT (CapitaLand Integrated Commercial Trust), Frencken, Genting Singapore, LREIT (Lendlease Global Commercial REIT), and Venture.
However, don’t expect a smooth ride, says Krishna Guha, who sees volatility for REITs.
For sure, cost of capital is falling, which should increase fair values, but keep an eye on operating costs.
On the other hand, Jarick Seet and Eric Ong think now is the time to raise weightings on Dyna-Mac and CD (ComfortDelGro) respectively.
| By Wong Wei Sum, Property & Gloves Analyst Question of the week: What are our views on Gloves sector’s outlook in 2024?  Riverstone Holdings is a key glove manufacturer listed on SGX.Glove makers are turning more positive on their 2024 outlook. While sales volume remains volatile with a shorter order lead time as buyers are in no rush to lock in a contract due to excess supply in the glove market, sales volume has improved significantly QoQ. This improvement could be due to rising restocking activities and lower price gap compared to their China counterparts (by USD2 3/k pcs). We expect plant utilization rates to increase in the upcoming quarters, reaching >35% to 45-50% (from the current range of 35% to 40-45%), leading to lower production costs ahead. Raw material prices have started to stablize after surging in Nov 2023. Both natural latex and nitrile latex (NBR) prices are now at USD1.16/kg and USD0.77/kg, down 3% and 1% respectively, since Nov 2023. Additionally, natural gas prices (which constitute 16-20% of total cost) has been trending down since early Nov 2023 too. Due to a time lag, glove makers’ natural gas cost is expected to be higher in 1QCY24 but it should come down later, perhaps from mid 2024, following international pricing. This will cushion the impact on bottom line and make pricing more competitive. We tactically upgrade the sector to POSITIVE (a contrarian rating). |
