STGT Drops after Huge Selloff from Major Investors, Analyst Recomm. “BUY” at TP of ฿106

Sri Trang Gloves (Thailand) Public Company Limited (STGT) has declined for 3-day straight for a total of more than 10% due to the rumor of selloff from major investors and in line with a fall in the stock price of Malaysian rubber glove manufacturers after several countries reported the progress in the development of Covid-19 vaccines. For the 2Q20F, STGT posted an all-time high quarterly profit of 1,056 million baht, a 487% rise YoY, driving the 1H20F net profit to stand at 1,478 million baht or an increase of 350% YoY. Analyst has given a “BUY” recommendation with a target price at ฿106/share.

 

The sources close to the matter revealed that there was a rumor of a huge selloff from the major investors who received an allocation of shares in the IPOs in order to collect the profit, leading the share price to fall for 3 days in a row. On August 11, 2020, STGT’s stock was closed at ฿85.75/share decreased ฿2.75/share or 3.11% with a trading value of 1,557.22 million baht. On August 13, the share price was closed at ฿78.25/share decreased ฿7.50/share or 8.75% with a trading value of 2,519.83 million baht. 

 

On Friday, August 14, STGT closed at ฿73/share decreased ฿5.25/share or 6.71% with a trading value of 2,203.11 million baht. After the closure of trading, a big lot transactions of STGT have been reported reported in the Stock Exchange of Thailand (SET) at the amount of 393,700 share for a total of 28.72 million baht at an average price of ฿72.96/share.

 

In addition, STGT’s share has declined in line with 2 major Malaysian rubber glove manufacturers such as Top Glove Corp, which closed at MYR23.54/share on Friday, August 14, decreasing MYR1.18/share or 4.72% and Hartalega Holdings Berhad, which closed at MYR16.02/share decreased MYR0.54/share or 3.26% in response to the positive progress of Covid-19 vaccine across the world. 

 

The major investors who receive an IPO allocation of STGT comprised of 1) Mr. Wichai Wachiraphong, which has received an allocation of 22.20 million shares, bringing him to be the 7th major shareholder of STGT 2) Tangkaravakoon family, the major shareholder of TOA Paint (Thailand) Public Company Limited (TOA) and Stark Corporation Public Company Limited (STARK), received an allocation in the total amount of 12.1 million shares  3) Mr. Aiyawatt Srivaddhanaprabha from King Power Group received 4.01 million shares and 9 other investors with a total of 22.67 million shares. 

 

Kasikorn Securities sees the decline in share price of STGT was due to an aftermath of the positive progress of Covid-19 vaccine in several countries and a concern over Hartalega Holdings, a glove manufacturer and supplier from Malaysia, on ramping up glove production. Kasikorn has given a “BUY” recommendation with a target price at ฿106/share, expecting 2H20F to boost up.

 

Meanwhile, foresees STGT’s 2020 net profit to surge 15% YoY to 5,487 million baht and jumps 42% YOY in 2021 to 9,844 million baht, benefiting from an increase in ASP to USD2.42/pc from USD2.33/pc. 

 

The robust global demand for gloves, which is still continuing, drove STGT profit in 2Q20 to grow by 510% to 1,056 million baht. While total revenue from sales in 2Q20F has booked an all-time high of 4,856.8 million baht, growing 70.5% YoY. 

 

STGT stated that it will continue to deliver high quality hand protection to users worldwide at the maximum output. The utilization rate of 95% will be maintained and STGT has streamlined its products mix and production process to ensure that STGT will achieve the highest production volume to save lives during the pandemic. The company is committed to the expansion plan to achieve 70 billion pieces in annual installed production capacity 2 years earlier than the initial plan.The new capacity will start to come out from SR2by 1Q21, followed by SR3 in 2Q21.

 

By the end of 2022, the capacity will reach 45.8 billion pieces per annum, representing a 40.5% growth from 2020, with the potential product mix of 50% NRgloves and 50% NBR gloves. Further cost-saving initiatives to achieve an even higher profit and return to shareholders are in STGT’s focus. The highest standard of good governance to all stakeholders, particularly STGT’s workers and staff, known as “best in class workforce treatment,” will continue to be the pride and practice.