KUALA LUMPUR: Credit Suisse retains its positive stance in glove-related stocks of Bursa Malaysia for 2021 due to its inexpensive valuation and higher dividends.
This is also despite the development of Covid-19 vaccine, which expected to kick off this year.
Credit Suisse co-head of Asean Securities and Malaysia head of research Danny Goh said the glove sector is trading at less than five times price to earnings ratio multiple, versus its historic average of 17 per cent, and is at present offering a dividend of more than 10 per cent.
"Thus, in terms of valuation and dividends point of view, gloves do provide very good value at this point of time," he said during Credit Suisse 2021 Asean Conference virtual media briefing today.
Goh said feedback from glove markers indicate that the average selling price of medical gloves is still trending upwards on a quarter-on-quarter basis, noting that 2021 'earnings is pretty much already in the bag'.
"While the pandemic does pose some question marks on whether how long demand and selling prices could continue to stay firm, but if we were to rely on the feedbacks of some of the glove makers, the forward orders will last them well into 2022," he said.
Goh said glove stocks do seem defensive at this point in time, given that it is one of the few sectors that is seeing positive earnings momentum offers very high dividend yield and trading at very low valuation relative to history.
Goh said in 2020, Malaysia did outperform many of its Asean peers, which saw an increase in market capitalisation of around six per cent year-on-year, largely due to the performance of gloves-related stocks.
"If we were to take the gloves out, the the rest of the market saw a two per cent compression in terms of market capitalisation.
"That will be a little bit more in line with the rest of Asean markets," he said.
ends