Is Comfort Gloves Bhd A Stock You Must Look At?

Comfort Gloves Bhd was originally listed as Integrated Rubber Corporation Bhd, a Taiping-based glove manufacturing firm that was established in 1993.
Sincerely, I believe its original founders were ambitious and had a vision for global success. However, it failed to achieve financial success that is reported by Top Glove, Hartalega, and Kossan Rubber.

Instead of hundreds of millions in profits, the company has suffered a string of losses and was classified as a PN17 entity on 27 December 2012. Its future seemed bleak. But, fortunately, the company had undertaken a restructuring exercise which led to its phenomenal turnaround. As I write, Comfort Gloves Bhd is worth RM 480.6 million in market capitalization and is one of the few impressive turnaround successes in Malaysia.

In this article, I’ll briefly summarize the progression of its turnaround and its financial standing. Thus, here are 7 main things that you need to know about Comfort Gloves Bhd before you invest.

#1: Stock Symbol

Ticker Symbol: KLSE: COMFORT / KLSE: 2127
Market Capitalization: RM 480.6 Million (5 June 2018)

Share Price: RM 0.86 (5 June 2018)

Industry: Glove Manufacturing

Syariah Compliant: Yes


#2: The Turnaround

The following is a brief summary of its turnaround:
Financial Year 2013
On 27 December 2012, Integrated Rubber Corporation Bhd was classified as a PN17 entity. It started to embark on a turnaround plan that consists of debt settlements with its lending banks and creditors and to raise needful working capital to stay in business.

Financial Year 2014

On 11 January 2013, Cheang Phoy Ken and Keen Setup Sdn Bhd, a corporate investor emerge as main shareholders of Integrated Rubber Corporation Bhd and had provided RM 22.40 million each in advances to make full settlement of the company’s liabilities. Cheang Phoy Ken is appointed as the company’s Managing Director on the same day itself, replacing its former board and the key management team.

Financial Year 2015

Under Cheang’s leadership, the manufacturer carried out and had completed its regularisation plan in financial year 2015. The company had returned back into profitability and had invested RM 4.2 million to add production lines for future growth.

Financial Year 2016

The company had raised RM 57.9 million from conversions of warrants into ordinary shares. On 13 July 2015, Integrated Rubber Corporation Bhd’s PN17 status was lifted away by Bursa Malaysia. A month later, it was renamed into Comfort Gloves Bhd. Subsequently, it invested an additional RM 20 million to add more production lines for future growth.

Financial Year 2017

Comfort Gloves Bhd had added a total of 11 glove production lines and thus, lifted its production capacity to 4.00 billion gloves per annum.

Financial Year 2018

Comfort Gloves Bhd had added another 3 production lines, and thus, raising its production capacity to 4.36 billion gloves per annum.

#3: Profitability

As a result, Comfort Gloves Bhd has recorded significant improvement in its financial results. Revenue had increased from RM 117.8 million in 2012 to RM 421.2 million in 2018. It made a small profit in 2015. Since then, it had made 3 consecutive years of profits where earnings had grown from RM 23.5 million in 2016 to RM 35.9 million in 2018.

Comfort Gloves Bhd had achieved a 3-Year Return on Equity (ROE) average of 13.39% a year. It means, it had generated, on average, RM 13.39 in earnings per year from every RM 100.00 in shareholders’ equity from 2016 to 2018.

Source: Annual Reports of Comfort Gloves Bhd

#4: Balance Sheet Strength

As of 31 January 2018, Comfort Gloves Bhd does not have bank borrowings which are long-term. It was reported to have as much as RM 28.63 million in cash reserves and a current ratio of 2.92. Thus, Comfort Gloves Bhd now has a healthy balance sheet to remain and to expand its business in the future.

#5: News on U.S. FDA Import Alert List

On 15 March 2018, Comfort Gloves Bhd’s 100%-owned subsidiary, Comfort Rubber Gloves Industries Sdn Bhd (CRGI) was listed under the import alert of the U.S. Food and Drug Administration (FDA). Hence, gloves exported to the United States are required to be inspected first upon its arrival. They will be released if they passed the inspection. Currently, the management team is working towards the removal of CRGI from the import list to ensure that its gloves will no longer be required inspection in the future.

The Exposure

In 2018, Comfort Gloves Bhd had derived RM 150.1 million in revenues from the United States and Canada. Export sales to North America had accounted for 35.6% of its revenues in 2018.

#6: Valuation

As I write, Comfort Gloves Bhd is trading at RM 0.86 a share.

In 2018, it had reported making RM 0.064 in earnings per share (EPS). Thus, its current P/E Ratio works out to be 13.40. Also, it has net assets of RM 0.44 a share. Thus, its current P/B Ratio works out to be 1.95.

Comfort Gloves Bhd had not declared and paid out dividends for a string of financial years. It made history recently as the board has announced the firm’s first-ever dividend payout recently for the financial year 2018. The amount of dividends per share (DPS) declared is RM 0.01. The ex-date is set to be on 6 September 2018 while the payment date is set to be on 26 September 2018.

If Comfort Gloves Bhd is able to maintain RM 0.01 in DPS for 2019, then, its expected dividend yields is 1.16%.

#7: Investors Relation

For further enquiries or to request for additional investment information on Comfort Gloves Bhd’s Investors Relation matters, you may contact:
Phone: +605 847 2777

Email: inquiry@comfort-rubber.com.my

Website: https://www.comfort-rubber.com.my/investor-relations/

#8: Major Shareholders

As at 30 April 2018, the substantial shareholders of Comfort Gloves Bhd and their respective direct shareholdings are as followed:

– Cheang Phoy Ken: 18.09%

– Keen Setup Sdn Bhd: 12.19%

– Dato’ Lau Eng Guang: 6.90%

– Lau Joo Yong: 6.53%

– Datin Goh Kim Mooi: 3.95%

Notes:

Cheang Phoy Ken is appointed as the Managing Director of Comfort Gloves Bhd. Sean Cheang, his son, is appointed as an Executive Director of Comfort Gloves Bhd.

The Lau family is a substantial shareholder of Comfort Gloves Bhd through both their direct shareholdings & indirect shareholdings held via Keen Setup Sdn Bhd. Lau Joo Yong, son of Dato’ Lau Eng Guang & Datin Goh Kim Mooi is appointed as an Executive Director of Comfort Gloves Bhd. Lau Joo Pern, his cousin, is appointed as a non-independent non-executive director of the company.

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Ian Tai

Ian Tai is the founder of Bursaking.com.my, a platform that empowers retail investors to build wealth through ownership of fundamentally solid stocks. It is an essential tool that sifts out stocks that grow profits consistently from a database of over 900+ stocks listed mainly in Malaysia. As a Malaysian with close family ties in Singapore, Ian publishes a series of newsletters on how anyone can invest profitability in both countries.

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