Special dividend galore for Supermax come June 2021?

IT is no secret that many shareholders were left disappointed with Supermax Corp Bhd’s ‘dismal’ interim single tier dividend of 3.8 sen/share which was declared alongside its recent record-breaking 2Q FY6/2021 net profit last Friday (Jan 29).

Perhaps in the quest to pacify its loyal shareholders, the glove maker is planning to dole out a special dividend in the second half of its financial year if indeed RHB Research’s latest projection were to hold water.

To re-cap, Supermax saw its net profit for 2Q FY6/2021 soared almost 3,500% year-on-year (yoy) to an all-time high of RM1.08 bil (2Q FY6/2020: RM30.02 mil) on the back of a revenue spike of almost 420% yoy to RM2 bil (2Q FY6/2020: RM385.5 mil).

“We participated in Supermax’s analyst briefing and returned feeling positive on the company’s long-term prospects,” wrote analyst Alan Lim in a company update. “We expect it to distribute special dividends in 3Q FY6/2021F and 4Q FY6/2021F.”

Lim further expects the dividend to be in the form of cash or shares. According to him, the company’s net cash level has surged to RM3.41 bil (RM1.32/share) as of end-December 2020 versus end-June 2020’s RM856 mil.

“Additionally, it currently holds 151.9 million treasury shares which could be utilised as dividends in the form of shares or for listing purposes on the Singapore Exchange (SGX),” noted the analyst.

Moving forward, RHB Research has retained its “buy” rating on Supermax alongside its discounted cash flow (DCF)-derived target price of RM10.60.

“In the short term, we expect earnings to continue its rise in 3Q FY6/2021F premised on higher average selling price (ASP),” opined the research house.

“Beyond that, Supermax is a beneficiary of stable gloves growth demand of 8-10% annually. Our ESG (environment, social & governance) score for Supermax is 2.89 (out of 4).”

Nevertheless, RHB Research highlighted that the risks associated with Supermax include (i) worse-than-expected gloves demand after the COVID-19 pandemic ends; (ii) lower-than-expected sales volume/US$; and (iii) higher-than-estimated raw material price

At 9.25am, Supermax was down 15 sen or 2.21% to RM6.63 with 3.32 million shares traded, thus valuing the company ar RM17.07 bil. – Feb 4, 2021

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