The return of ‘King Stanley’ to steer Supermax through thorny patches

THE appointment of Datuk Seri Stanley Thai Kim Sim as Supermax Corp Bhd’s executive chairman cannot be timelier.

In conjunction with the release of the company’s 1Q FY6/2022 results yesterday (Nov 17), the Big Four glove maker announced via a Bursa Malaysia filing that Thai who founded the Supermax group in 1987 would assume the post of executive chairman with effect from Dec 8.

Having previously served as CEO and group managing director of Supermax previously, Thai, 61, was instrumental in growing Supermax into one of the world’s largest rubber glove players with 12 manufacturing plants in Malaysia and eight overseas distribution centres in the US, Canada, Brazil, UK, Ireland, Hong Kong, Japan and Singapore.

However, he was sentenced to a five-year jail term and fined RM5 mil by the Sessions Court in 2017 after he was found guilty of insider trading. This disqualified him as a director of Supermax, and he resigned from the board in April 2018.

An application by Thai to be reinstated as director in August 2018 was dismissed by the High Court. In September 2020, his conviction was overturned by the High Court alongside that of Tiong Kiong Choon, who was the remisier alleged to have facilitated the insider trading.

Thai is currently the Supermax’s largest shareholder by virtue of his controlling 38.26% stake held via Supermax Holdings Sdn Bhd.

Following Thai’s ‘ascension of the throne’, current chairman Albert Saychuan Cheok, 71, will be re-designated to the role of independent non-executive director (INED) also with effect from Dec 8.

Aside from Thai, Supermax also announced the appointment of Padini Holdings Bhd’s group chief financial officer Sharon Sung Fong Fui, 47, as INED with effect from Dec 8, probably as replacement to Datuk Ting Heng Peng, 61, who will be resigning as the company’s INED on the same date.

Datuk Seri Stanley Thai Kim Sim

Weaker financial perfomance

Despite a 7.6% increase in its 1Q FY6/2022 revenue to RM1.46 bil, Supermax’s earnings declined 19.1% to RM638.5 mil from RM789.5 mil a year ago.

The weaker performance was due to the lower average selling price (ASP) and higher tax rate of 28.4% (versus 22.6% in 1Q FY6/2021) which offset the impact of volume growth, according to TA Securities Research.

On a quarter-on-quarter (qoq) basis, the company’s pre-tax profit dropped 24.4% to RM930.9 mil as revenue fell 22.4% to RM1.46 bil, attributable to (i) temporary closure of production plants during the enhanced movement control order (EMCO) in July; (ii) lower ASP and (iii) restriction on number of workers under the National Recovery Plan (NRP).

This prompted the research house to reduce Supermax’s FY6/2022/FY6/2023 earnings estimates by 1.3%/43.2% after lowering its ASP by 15.6% while maintaining its FY6/2024 earnings estimates.

Following the earnings revision, TA Securities Research reiterated its “sell” rating on Supermax while slashing the company’s target price to RM1.22 (from RM1.43 previously).

Moving forward, the research house foresees that it will be a tall order for the group to divert its sales to other markets following the Withhold Release Order (WRO) imposed by the US Customs and Border Protection (CBP).

This is given the US market accounts for about 20% of Supermax’s sales in addition to the group having to face stiff market competition.

“In addition, the Canada Federal Government contract has been put on hold whereby we believe the contracted prices by the government are much higher than the current ASP of gloves,” projected TA Securities Research.

According to the research house, Supermax’s current production capacity stood at circa 26.2 billion. The company is in the midst of building five glove manufacturing plants capable of producing 22.25 billion pieces of gloves concurrently.

At 9.42am, Supermax was up 2 sen or 1.1% to RM1.84 with 3.65 million shares traded, thus valuing the company at RM5 bil. – Nov 18, 2021

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