Reflections on Volume

Big volume without further upside equals distribution
Big volume without further downside equals accumulation

Volume tends to peak at turning points
Volume often precedes price movement
Volume is a relative study

Tuesday, January 26, 2010

We upgrade our recommendation on Supermax to Strong Buy

• We upgrade our recommendation on Supermax to Strong Buy (from
Buy) with a higher 12-month target price of MYR6.50 (from MYR4.60).
• We utilize a target PER of 12x (from 9x) against our projected 2010
EPS for Supermax and add our estimated tax exempt net DPS for
2010 of 9.9 sen. The higher target multiple is due to a higher peer
average and is a reflection of the strong demand-supply outlook of the
• In addition to a healthy demand outlook for gloves, Supermax’s OBM
products, which carry higher margins, have expanded in terms of
revenue contribution (to 63.9% from 60% in mid-2009). As such, we
believe increasing sales and expanding margins over the medium term
will provide catalysts for Supermax’s share price outperformance.
• Risks to our recommendation and target price include a sudden upturn
in latex prices and an appreciating MYR, as revenue is predominantly
derived from exports.

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