Singapore lists multiple stocks with a rubber focus, with activities spanning manufacturing to distribution. Two of the stocks, China Sunsine Chemical Holdings and Top Glove Corp Bhd have been amongst Singapore's 15 best performing stocks in 2018 YTD.
Together the six stocks with a rubber focus have averaged an 18% total return in the 2018 YTD, following 19% average total returns in 2017. Key drivers for the sector include rubber prices, current and expected consumer demand in addition to pricing competition.
The majority of these rubber focused stocks have foundations in South East Asia and all have revenue exposure to China, ranging from 3% for Sri Trang Agro-Industry PCL to 65% for China-based China Sunsine Chemical Holdings.
In September, Malaysia's Primary Industries Minister Teresa Kok Suh Sim stated the rubber industry is expected to become the number one commodity contributor to the country's economy. This was partly attributed to palm oil facing difficulties in the international market. The Star Online (click here) also noted that Teresa Kok maintained Malaysia was among the world's top exporters of rubber products, exporting products to 195 countries.
As highlighted by Halcyon Agri in its corporate overview found here:
- Rubber is a universal resource that is essential to modern life and natural rubber, in particular, is highly sought-after because of its high strength, resistance, elasticity and plasticity.
- Natural rubber is used in countless products spanning every sector from tyres to shoe soles, and from medical gloves to seals and gaskets.
There are at least 6 stocks listed on SGX that have a rubber-focused business covering natural rubber products, rubber chemicals, rubber glove manufacturing and distribution.
SGX also lists other stocks, aside from these 6, that have rubber-related businesses. For instance, Stamford Tyres is an investment holding company and the principal activities of the subsidiary companies consist of the wholesale and retail of tyres and wheels, design and contract manufacturing of tyres for proprietary brands, tyre retreading, equipment trading, servicing of motor vehicles, and the manufacturing and sale of aluminum alloy wheels.
All six stocks with a rubber focus report revenue exposure to China, ranging from 3% for Sri Trang Agro-Industry PCL to 65% for China-based China Sunsine Chemical Holdings. This is based on geographical segment reporting in the most recently published Annual Reports.
While China Sunsine Chemical Holdings production facilities are located at Shanxian, Weifang and Dingtao in the Shandong Province, the majority of the six stocks are based or have foundations in South-East Asia:
- Top Glove Corp Bhd was founded in Malaysia in 1991 by Tan Sri Dr Lim Wee Chai, as a business venture of one factory, one glove production line and 100 staff. Now, Top Glove Corp Bhd operates 40 factories with 648 production lines and exports to 195 countries. To read more, click here.
- Established in Thailand in 1987, Sri Trang Agro-Industry Public Company Limited is currently the world's largest fully integrated natural rubber company with a market share of 10% of global natural rubber consumption. The company focuses on the production and export of Ribbed Smoked Sheets (RSS”), Technically Specified Rubber (TSR”) and Concentrated Latex. To read more, click here.
- Riverstone Holdings was incorporated in Malaysia in 1991 as Riverstone Resources Sdn Bhd to manufacture cleanroom gloves. The company specialises in the production of Cleanroom and Healthcare Gloves, finger cots, cleanroom packaging bags and face masks and exports more than 80% of its products to key high technology customers in Asia, the Americas and Europe. To read more, click here.
- Halcyon Agri maintains its businesses has a rich history, tracing it roots back to the 1930s with the founding of PT Hok Tong and PT Rubber Hock Lie in Indonesia, pioneer natural rubber producers in Southeast Asia. Today, Halcyon Agri's workforce comprises 15,000 employees located in over 50 locations. To read more, click here.
- UG Healthcare started out as a rubber glove manufacturer with a single production line in 1989 and currently has two manufacturing facilities located in Seremban, Malaysia, capable of producing up to 1.3 billion gloves per annum. To complement the manufacturing platform, it has established an extensive distribution network globally through its own distribution companies based in the United States of America, United Kingdom, Germany, the People's Republic of China, and Nigeria as well as through third party distributors. To read more, click here.
ROE & Key Business Drivers
The average Return on Equity (ROE) for the six stocks is 16.4%, which ranges from 2.0% for Halcyon Agri Corp to 34.8% for China Sunsine Chemical Hldgs.
Return on Equity (ROE) measures a corporations profitability by revealing how much earnings a business generates with the money shareholders have invested.
Key business drivers for the sector include rubber prices, current and expected consumer demand in addition to competitors pricing. The European Research and Rubber Laboratories note that in order to respond to the requirements of its customers, providers of general rubber goods also need to develop a very close relationship with its customers.
Operational efficiency in addition to technical capability in rubber plantations and processing are also key considerations for these companies while moves in foreign exchange rates can also impact overseas revenues of rubber product exports.
Recent Stock Performances
The six stocks have averaged 18.0% total returns in the 2018 year through to 10 December, following on from averaging an 18.5% total return in 2017. In the 2018 year through to through to 10 December, the three largest capitalised of the six stocks as of the end of 2017, all generated gains.
Recent performances of the six stocks are tabled below.