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

Friday, February 19, 2010

Supermax - Distributing more angpows?

Potential profit jump; maintain BUY. Yesterday, Business Times penned an article on its interview with Supermax’s managing director, Dato’ Seri Stanley Thai. His comments were very much in line with our view but his forecasts of industry demand and supply differ from our estimates which are based on information gathered from our industry contacts. Also noteworthy was management’s confirmation of a special dividend if it exceeded its net profit target for FY09. We retain our earnings forecasts pending Supermax’s release of its 4Q results next week. We expect its core net profit to be stronger on both qoq and yoy basis. As industry prospects remain favourable, we maintain our BUY call on Supermax. Our target price remains intact at RM7.96, still pegged to a 20% discount to Top Glove’s target P/E of 16.5x. Potential re-rating catalysts include the anticipated strong 4Q results, continuing uptick in glove demand and upcoming capacity expansion. Supermax remains one of our top picks for the rubber glove sector.


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