Sri Trang up 27.2% after posting higher profit, dividendBy Uma Devi
Feb 18, 2021
SHARES of Thailand-based rubber producer Sri Trang Agro-Industry (STA) climbed on Thursday after the company announced a solid set of financial results for its fourth fiscal quarter ended December 2020, and a sizeable dividend. It intends to pay 1.75 baht per share, or the equivalent of S$0.07658 per share.
With this, STA’s total dividend for 2020 stands at 2.25 baht per share versus 0.35 baht in 2019. Investors can expect to receive their dividend payouts on Apr 29.
The counter opened at S$1.48 on Thursday, and made steady gains over the course of the morning. At 11.30am, the stock had risen 11.5 per cent or S$0.17 to S$1.65. STA then pared some gains to trade at S$1.62 at 11.40am, before recovering back to S$1.65 before the midday break. In the afternoon session, STA shares continued their upward trajectory. The counter closed at S$1.87, up 27.2 per cent or S$0.40.
UOB Kay Hian analyst Thunya Sutavepramochanon noted that STA posted an "impressive" net profit of some 5.5 billion baht (S$243.5 million) for the fourth quarter of FY2020, up from just 74 million baht for the corresponding period a year ago on the back of healthy performances from both its glove and natural rubber businesses.
To recap, STA’s glove-making unit, Sri Trang Gloves Thailand (STGT), completed an initial public offering (IPO) and listed on the Stock Exchange of Thailand on July 2, 2020. From Q3 FY 2020 onwards, STA’s stake in STGT was reduced to 56.2% from 81.1%.For FY 2020, STA’s net profit came in at 9.53 billion baht, reversing from losses of 148.5 million baht in FY 2019. The group said this was due to a “record profit” from its glove business, as well as the profitability of its natural rubber business despite the industry slowdown.
STA’s topline for the fiscal year grew 25.2 per cent to 75.48 billion baht. While revenue from natural rubber products fell 7 per cent from the previous year, contributions from gloves more than doubled to 30.75 billion baht as the Covid-19 pandemic fuelled glove demand across all geographic markets.
Citi analyst Megat Fais said in a report that while STA’s midstream business did recover from the previous quarter due to better volume and pricing, the group’s downstream business - through STGT - yet again “stole the limelight”.
Looking ahead, Ms Thunya said the firm's Q1 earnings for FY2021 will continue to grow on both year-on-year and quarter-on-quarter bases and could reach a "historical peak", driven by higher average selling prices (ASP) of gloves.
Another contributing factor to strong earnings growth in the current year are the healthy gross margins of the natural rubber business, following an uptrend in natural rubber prices that is boosted by recovery in the global automobile industry.
She added that STA plans to start a hemp plantation business in March this year, and STA will have the largest hemp planting area in Thailand. This business, she said, is expected to rake in some 450 million baht in revenue for the group in 2022.
Citi’s Mr Fais, however, warns that STA has been assigned a “high risk” rating as the stock is deemed relatively volatile. “Despite the strong fundamentals, the sector may continue to be perceived as a “pandemic play”. As such, incrementally positive headlines related to vaccine development could lead to profit taking activities and short term volatility,” he said.
Thailand ramps up medical glove production as it chases MalaysiaCompanies set to invest over $800m in new capacity as global demand surgesAPORNRATH PHOONPHONGPHIPHAT, Nikkei staff writer
January 19, 2021 14:37 JST
BANGKOK -- Investments in the production of rubber gloves are expected to exceed 24 billion baht ($800 million) over the next few years in Thailand, the world's largest producer of natural rubber, thanks to demand triggered by the COVID-19 pandemic.
At least five companies, not all in the medical industry, have been cranking up production of medical gloves in hopes that Thailand -- currently the second-largest manufacturer after Malaysia, which is far and away the biggest producer -- will gain a bigger share of the global market.
"A lot of Thai and foreign companies are approaching us asking about Thailand's latex production capacity," Uthai Sonluksub, president of Thailand's Rubber Farming Industry Organization told reporters. "They want to secure raw materials before they start building rubber glove factories," he said.
The move to increase the production of medical gloves in Thailand comes as the reputation of Top Glove, the world's largest manufacturer in neighboring Malaysia, is being shaken by COVID-19 clusters at its plants.
Thailand has 19 rubber glove factories with a total production capacity of 46 billion pieces per year, 90% of which was, typically, for exports, with the kingdom accounting for around 13% of global supply, according to the Thai Rubber Glove Manufacturers Association. New investments in the industry are expected to expand Thailand's share of the market to 20% by 2022.The global market for medical gloves is estimated to have reached 345 billion pieces in 2020, taking the pandemic into account, based on figures from the Malaysian Rubber Glove Manufacturers Association. Malaysia is seen accounting for 62% of the market last year.
Sri Trang Gloves Thailand plans to spend the biggest sum, of 9.9 billion baht, to expand its production capacity at its four factories. The country's largest manufacturer of medical gloves raised 14.9 billion baht in an initial public offering on the Thai stock market in June to fund the expansion.
The company hopes to ramp up production capacity to 70 billion pieces by 2026, from 32 billion pieces currently.Singhaseni Group, a medical equipment importer, has similar plans. It partnered with Atgenes Global Link, a Bangkok-based biotech company, to invest 6 billion baht in building a rubber glove factory in the southern city of Songkhla.
Thonburi Healthcare Group, which operates private hospitals with a total of 963 registered beds, has also invested 1 billion baht to build a plant with a production capacity of 900,000 pieces per day. Even sugar producer Khonburi Sugar is venturing into rubber glove manufacturing, though its investment budget has yet to be finalized.
All this is good news for local rubber producers. "Rising demand in rubber glove industry is expected to help push up natural rubber price substantially over the next few years," said Luckchai Kittipol, former president of the Thai Rubber Association.
Rubber farmers have been hit hard by slumping prices over the past few years. Rubber prices fell by around 50% to 50 baht per kilogram as the weak global auto industry led to a fall in demand for tires, which accounts for 70% of global natural rubber output.
Sri Trang closed @ S$2.00 on 12 Mar 2021.
