Overweight. The operating environment for the glove producers has turned
favourable, with falling input costs, a stronger USD and growing
demand. Moreover we believe that the sector is a strong proxy to the
healthcare sector, given that 90% of total production is medical gloves.
Comparatively, the gloves sector trades at 10x 2013 earnings vs. 23x
for the regional healthcare stocks. The glove sector is thus due for a
rerating. We lift Hartalega to BUY with a higher TP of MYR5.00 (+18%).
We reiterate BUYs on Top Glove (TP +7% to MYR6.00) and Kossan.
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Source: Maybank Research - 6 July 2012
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