Just a few years after the Covid-19 pandemic, the world is on the brink of another global outbreak — monkeypox (Mpox), a virus which causes painful rashes, swollen lymph nodes and fever. Although the virus is not new, the World Health Organization (WHO) declared a public health emergency in mid-August due to the rapid spread of a new strain in Africa.
As the outbreak worsens, Asian countries, including major economies like China and India, have increased their surveillance and countermeasures, especially after Thailand reported its first suspected case of the new variant.
Unsurprisingly, some regional publicly-listed glovemakers have experienced significant share price movements since then. After the WHO’s announcement, Singapore Exchange S68 (SGX)-listed companies like Top Glove, Riverstone, Sri Trang Gloves STG and UG Healthcare also saw their share prices rise. For instance, Sri Trang Gloves’ share price jumped 22.8% on Aug 21, closing at 43 cents, and is up 48% year-to-date.
The rise in share prices reflects ongoing speculation among investors about whether demand for medical products will increase if Mpox escalates into a major outbreak. This mirrors the surge in interest experienced by glovemakers during the Covid-19 pandemic.
At the time, the rapid spread of Covid-19 led to increased glove use in healthcare and sectors such as retail and F&B. This unprecedented demand and supply shortages allowed glovemakers to charge higher prices, boosting their revenues.
Increased awareness of hygiene and infection control led to sustained demand. Many companies secured long-term contracts and pre-orders, ensuring steady income and strengthening their market position throughout the pandemic.
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Covid-19 boosted the earnings of SGX-listed glovemakers. For FY2020 ended Aug 31, 2020, the SGX and Bursa Malaysia-listed Top Glove reported earnings of RM1.87 billion, a nearly fivefold increase from RM364.68 million a year prior.
Riverstone also posted earnings of RM647.3 million for FY2020 ended Dec 31, 2020, up 396.3% from RM130.4 million a year ago. UG Healthcare reported earnings of $13.4 million for FY2020 ended June 30, 2020, about 5.3 times up from $2.5 million in the previous year. Sri Trang Gloves reported earnings of THB14.4 billion for FY2020 ended Dec 31, 2020, up 23.5 times from THB613.9 million a year ago. The company, which has a primary listing on the Stock Exchange of Thailand, got its secondary listing on the SGX in May 2021.
As a result of the earnings outperformance, the share prices of these stocks rose sharply during the pandemic. According to Bloomberg, Top Glove peaked at $3.13 on Aug 3, 2020, a far cry from its share price of 51.33 cents on Dec 30, 2019. Shares in Riverstone similarly peaked at $2.35 on Aug 3, 2020, up from its share price of 46 cents on Dec 30, 2019. UG Healthcare also saw its share price peak at $1.13 on Aug 7, 2020, compared to a mere 4.67 cents on Dec 30, 2019. Figures for Top Glove and Riverstone have been adjusted for share bonuses.
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At present, all glovemakers have lost their pandemic gains on the back of earnings declines and/or losses (see table), and are in need of an earnings impetus. Shares in Top Glove closed at 28.5 cents on Aug 27 while shares in Riverstone and UG Healthcare closed at 91.5 cents and 12.3 cents respectively on the same day. Shares in Sri Trang Gloves peaked at around $2 when it first listed on the SGX. The company’s shares last closed at 42 cents on Aug 27.
‘Not another Covid-19’
Several factors set Mpox apart from Covid-19. Unlike the latter, which emerged relatively recently, Mpox was first reported in humans in 1970 in Congo, central Africa. The disease was declared a global public health emergency in July 2022, when it affected nearly 100,000 people worldwide, before this status was rescinded on May 11, 2023.
The WHO’s latest declaration on Aug 14 follows a rise in Mpox cases in Africa, which has reported over 15,000 cases and 537 deaths this year. Given this, could SGX-listed glovemakers replicate their Covid-19 successes with the Mpox outbreak? Analysts do not think so.
Analysts from RHB Bank Singapore tell The Edge Singapore that they do not expect the Mpox outbreak to drive significant growth, as Mpox already has an established vaccine, unlike Covid-19, which took about two years for a vaccine to be developed.
Developed by Danish pharmaceutical company Bavarian Nordic, the Jynneos vaccine is effective in preventing Mpox and reducing the severity of symptoms. Singapore’s Health Sciences Authority has approved Jynneos for the prevention of smallpox and Mpox in adults over 18, Bavarian Nordic announced on Aug 27.
RHB also notes that, unlike Covid-19, Mpox primarily spreads via body-to-body contact. “Although there is scientific research suggesting potential airborne transmission, we believe the global healthcare system is well prepared to overcome such outbreaks, given the lesson learnt from 2020–2022, not forgetting to mention the availability of relevant vaccines in the market,” the analysts add.
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They highlight that the virus may be less deadly than Covid-19, given that the WHO lifted its July 2022 public health emergency concern in less than a year. Moreover, glovemakers RHB has consulted do not expect increased demand from the Mpox outbreak. Analysts note that the current volume recovery is primarily due to structural demand recovery, as inventory destocking ended earlier this year.
The ongoing stock replenishment activity, coupled with potential trade diversion to non-China-made products due to higher US import tariffs by 2026, should continue to propel glovemakers’ profitability moving forward, the analysts say, adding: “The higher demand is fundamentally driven rather than thematically driven.”
The team at DBS Group Research also does not see Mpox influencing share price trends anytime soon. While the brokerage does not cover gloves, it notes that travel stocks could be affected by the moderation of peak travel demand. These stocks are also more likely to see earnings declines due to softening consumption than Mpox.
Glovemakers’ latest set of results
It remains to be seen whether SGX-listed glove stocks will have another strong year. For 9MFY2024 ended Aug 31, Top Glove reported a narrower loss of RM58.2 million ($17.4 million) compared to the RM463.5 million loss in 9MFY2023 due to stronger demand for gloves. According to Top Glove, its customers are replenishing inventories and clearing excess stock.
Riverstone reported earnings of RM144.7 million for 1HFY2024 ended June 30, up 54.6% y-o-y on the back of recovering demand for its cleanroom and healthcare gloves. Gross profit margin rose by 12.2 percentage points y-o-y to 39.6% from a better product mix, higher average selling price (ASP) and lower cost of sales.
UG Healthcare reported a $5 million loss in 1HFY2024 ended Dec 31, 2023, 4.2% deeper than the $4.8 million loss in the year before. In an announcement dated Feb 13, the company attributed the deeper loss to higher marketing expenses, higher interest rates and the share of loss from its associates, which registered a profit in the year before. The company had yet to release its FY2024 results, slated to be out on Aug 29, at press time.
Sri Trang Gloves reported a net profit of THB525.2 million ($20.1 million) for 1HFY2024 ended June 30, up 3.6 times y-o-y.
In a June 14 report, UOB Kay Hian analyst Jack Goh kept his “overweight” rating on Malaysian glove companies.
“The Malaysian glove sector is officially out of the woods with anticipation of sequential earnings growth coming into fruition throughout FY2024. We have also observed a feasible trend of improving operating statistics from the past few quarters,” Goh writes.
The analyst, who covers Top Glove, Hartalega and Kossan’s latest operating statistics in his report, sees the previous declines in ASP coming to a halt and are, instead, gradually reversing. Volume sales have also seen a “steep” q-o-q improvement, adds Goh.
