August 05, 2021

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Comfort Gloves (Q1 FY 21) Results Update

A stellar record breaking results from Comfort gloves. It is impressive because it is one of the smaller glove players but being able to achieve such results is no mean feat. Looking at this Q1 results alone, it makes up 76% of the full year FY 20. This would mean come next quarter, their results will definitely exceed the full year 2020 by far. Additionally, the company is now net cash RM 200 million despite expanding their facilities & line expansion. By end 2021, their capacity would reach 8.6 billion which is not far from Riverstone. 

Comfort also focuses on specialty gloves which distinguishes itself from other ordinary glove makers. Prior to Covid-19, Comfort gloves is one of those smaller glove companies that was in profitable position. It wasn't loss making like Careplus and or had weak cashflow like Rubberex. This indicates the company management do have their strength and capability. With the current dividend of 5 sens declared, the yield in this single quarter alone is 2.4% at current share price of RM 2.10. Comfort remains confident with their outlook likely because of their added capacity and marketing position for their products. 

Comfort is also an interesting acquisition or M&A target. This is why it is important to distinguish between Fair Value and Target Price. Comfort is definitely worth more than what its current share price. Prior Covid-19, it was already trading between 80-90+ sens. With the results 9 folds what it was pre-Covid 19, does it make sense to ignore past 2 years earnings and for Comfort to be trading at where it is currently despite stronger balance sheet, stronger earnings and larger capacity?

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