It said on Thursday it had raised the FY18-20F earning per share (EPS) by 12.4%-19.0% following the stronger-than-expected 2QFY18 results.
This is to mainly account for: i) higher utilisation rate leading to an increase in production volume, ii) higher operating efficiency and iii) lower raw material prices.
“Nevertheless, our estimates indicate that 2HFY18 is likely to be weaker than 1HFY18 due to the recent strengthening of the ringgit vs. US$ and a likely rebound in raw material prices,” it said.
CIMB Research said the RM2.35 target price was still based on an unchanged 12 times CY19F P/E (50% discount to the glove sector).
“Nevertheless, we retain our Hold call. Despite improved earnings visibility, Supermax’s share price may continue to be weighed down by concerns over reputational risks.
“We would turn more positive in the event of a successful appeal for the conviction of insider trading faced by its managing director, Datuk Seri Stanley Thai. Downside risk: sharp strengthening of RM vs. US$,” it said.