KUALA LUMPUR: TA Securities is optimistic about the turnaround prospects for Mah Sing Group Bhd's currently loss-making glove business, driven by improving demand, potential easing of raw material prices.
This is due to increased supply and lower butadiene costs, and better average selling prices, particularly in the US market.
According to the firm, a key catalyst is the significant tariff hikes on medical glove imports from China, with rates set to increase from 7.5 per cent to 50 per cent in 2025 and 100 per cent in 2026.
"With 90 per cent of Mah Sing's glove orders destined for the US, the division is well-positioned to benefit from this shift in market dynamics.
"During the last results briefing, management revealed that 6 out of 12 production lines, with a total annual capacity of 3.68 billion pieces, are operational. "Utilisation is expected to rise to 10 lines by the first quarter of 2025 (1Q25), further enhancing production efficiency," it noted.
TA Securities said the division is targeting breakeven by 2Q25, contingent on average selling prices (ASPs) surpassing US$21 per thousand pieces, up from the current level of slightly above US$20 per thousand pieces.
On Mah Sing's property segment, the firm said it likes the group's focused strategy of delivering affordable housing to the mass market, particularly in urban areas.
"Targeting first-time homebuyers, the group has concentrated on properties priced below RM500,000 per unit, which account for 72 per cent of its 2024 residential sales target.
"The M Series launches have been well received, achieving an impressive uptake rate of over 90 per cent thanks to their strategic locations, competitive pricing, and alignment with government initiatives supporting homeownership for middle-income buyers," it noted.
Buoyed by this robust demand, the firm believe Mah Sing is on track to achieve its 2024 sales target of at least RM2.5 billion.
As of the first nine months of 2024 (9M24), the group had already achieved 74 per cent of its full-year target, with RM700 million in new launches planned for 4Q24 to maintain momentum.
"Looking ahead, we anticipate the 2025 sales target to exceed 2024's, supported by a strong pipeline of new launches and active land acquisitions.
"The sustained success of the M Series affordable homes is expected to drive continued sales momentum into 2025, reinforcing Mah Sing's leadership in the affordable housing segment," it said.