Wednesday, 10 January 2018

Supermax (3) - Turning Around

Publish date: 

1. Recent Quarter Result

Two days ago, Supermax released its September 2017 quarterly report. EPS rebounced to 4.2 sen. I am quite pleased with the result so I added more at RM2.04.

2. Information From AGM

I attended the company's AGM on 20 November. The following is some of the relevant information provided by management :-

(a) Water issue for Plant 10 and 11 has been fully resolved. These two plants are gradually scaling up production and expects to reach full capacity by January 2018.

(b) In previous quarters, plant 10 and 11's depreciation charges were booked in even though unable to generate revenue due to water issues. In this regard, full production will have positive impact on profit margin. 

(c) China is cleaning up its environment. Many people is aware of the PRC government's effort to curb green house gas emission (both to fight global warming and to clean up its air). Less known is its effort to clean up its water under a system called 河长制. 

Basically, every stream, river and lake in China will have a caretaker (河长). It is usually the top leader in the area. This person is responsible for keeping the health and cleanliness of the river under his supervision. If the river is polluted, he / she will be directly held responsible. To ensure compliance, many polluting factories had been closed down. According to Supermax, this has caused users of Vinyl Gloves to switch to Rubber Gloves, benefiting Malaysian manufacturers. This is expected to be a permanent feature.

(Stanley Thai, CEO of Supermax during 2017 AGM)

(d) The company targets to invest RM100 mil in contact lenses. So far, it has invested RM70 mil. It has started selling online in US and is now trying to enter Japan. The Japanese market is huge but has very stringent requirement. One way to go around it is to acquire a Japanese manufacturer (in negotiation). China is also a big market, but apparently very protectionist. Stanley Thai said unlikely to be able to sell there unless the Malaysian government provides assistance.  

(Will the Malaysian government step in to give Stanley Thai a helping hand ? Laughdieme....)

Anyway, it won't bear fruits so soon. Supermax expects contact lense positive contribution only by second half of 2019.

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