Supermax's strong Q4 not sustainable, FY23/24 EPS cut by 21pct by Affin Hwang

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KUALA LUMPUR: Supermax Corp Bhd's strong performance for the fourth quarter (Q4) ended June 30, 2022 is not sustainable, according to Affin Hwang Capital.

The research house said this was given that the bulk of the improvement was due to foreign exchange gains of RM39 million, which were significantly higher than the RM25 million achieved in the nine months of financial year 2022 (9MFY22).

The firm said the gains were likely due to Supermax management taking a view on currency movements, and could have been losses if the movement had been unfavourable.

"The decline in revenue is a better indicator of the weak demand and overcapacity faced by the sector.

"Most of the existing glove manufacturers in Malaysia have reported a decline in profit quarter on quarter (qoq)," it said.

Overall, Affin Hwang said Supermax's financial year 2022 (FY22) results came within expectations.

Supermax recorded a net profit of RM732.4 million in FY22, making up 103 per cent and 97 per cent of Affin Hwang and the consensus' full-year estimates.

"We lowered our 2023-24 earnings per share forecasts by 21 per cent to factor in our latest margin and capacity assumptions.

"We have also cut our target price to 70 sen from 75 sen and downgrade our call to Sell from Hold for Supermax.

"The key upside risks include unexpected foreign exchange gains and exit of unprofitable glove manufacturers in the near term," it added.
 

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