Glove vs steel through the crystal ball of Uncle Koon

EVERY investor out there – or punter for the matter – would wish that they could be a stock genius by possessing the versatility of stock maestro Koon Yew Yin.

People who look up to 88 year-old Uncle Koon would regard him as a strategic guru to the extent of an investor extraordinaire – the Malaysian equivalent of Warren Buffet.

As a learned investor himself, he obviously has his own way to resonate with the investor fraternity (although not everyone is always in concordance with him).

From subtly sharing his viewpoint entitled LB Aluminium is Much Cheaper than Press Metal & PMB, Uncle Koon is back with his justification of (i) why glove stock prices are dropping?, and (ii) why steel stock prices are rising? (both opinions are currently featured on the popular I3investor portal).

Bear in mind that promoting stocks is an offence as per the Securities Commission’s (SC) latest Guidance Note on Provision of Investment Advice that the market regulator issued on Dec 3 last year.

In this regard, the SC has cautioned that it is more likely to consider discussions on specific stocks on blogs, forums or other social media as an investment advice if they involve the provision of recommendation or opinion which may induce readers to take an action regarding the specific stock.

“Any person carrying on a business of giving investment advice without a license commits an offence under the CMSA which is punishable with a fine not exceeding RM10 mil or imprisonment not exceeding 10 years or both, if found guilty,” warned the SC.

Glove rationale

Once a staunch advocate of glove stock himself vis-à-vis Supermax Corp Bhd, Uncle Koon contended that the oversupply of medical gloves has resulted in the average selling price (ASP) of gloves is dropping, thus limiting the profit stream of glove makers.

“Unfortunately, many people did not believe me,” he lamented. “In fact, a few senseless critics in the i3investors forum (where his views are being featured) often said that when KYY ask you to sell, they must buy.”

Uncle Koon went on to justify that all existing glove makers have added many new production lines in each of their plant apart from constructing new ones. Moreover, many companies who are traditionally not in the glove business also constructed new factories to make gloves. As a result, the supply exceeds demand. 

Pointing to Supermax which revealed its 3Q FY6/2021 results yesterday (May 5), Uncle Koon contended that the glove maker’s earnings per share (EPS) has dwindled to 38.83 sen from 41.14 sen for the quarter ended end-December 2020.

“That simply means, Supermax has reported reduced profit. That is why its share price has been dropping in the last few days,” he conceded by displaying the price chart of Supermax alongside the other three Big-Four glove makers, namely Top Glove Corp Bhd, Hartalega Holdings Bhd and Kossan Rubber Industries Bhd (all of which are also facing similar situation).

Coincidentally, all the Big-Four glove stocks are facing sell-down today with Supermax being the worst hit (it is currently the top loser having shed 62 sen or 11.13% to RM4.95 with 85.77 million shares traded as at 3.34pm).

 Steel rationale

As for steel industry outlook, Uncle Koon argued that since China – which is the biggest steel producer in the world – wants to reduce the use of coal to reduce air pollution, it has reduced steel production.

“As a result, the price of steel has gone up by about 50% in the past 12 months,” he rationalised. “All the steel products makers will benefit because their steel stocks and manufactured goods have also gone up in price. That is why all the steel stock prices have been going up.”

Like glove stocks, Uncle Koon stressed that profit growth prospect is the most powerful catalyst to move stock price.

He listed five steel companies, namely Leon Fuat Bhd, Haip Teck Venture Bhd, Melewar Industrial Group Bhd, CSC Steel Holdings Bhd and Astino Bhd.

Of the five companies, Uncle Koon zoomed into Leon Fuat which he described as “the cheapest in term of PE (price-to-earnings) ratio.” – May 6, 2021

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