Sri Trang Agro-Industry (STA)’s shares were the third most traded stock on the Stock Exchange of Thailand (SET) Monday morning as the stock bucked gloomy trends to rise 130 per cent year-to-date on news that its rubber gloves unit may be listed.
The stock opened at 22.7 baht per share Monday morning before it traded up to 23.5 baht at its highest before settling at 23.2 baht by noon, representing a 0.5 baht or 2.2 per cent rise in price since opening.
KTB Securities (Thailand) was one of the brokers to point to STA Monday morning as the securities firm believes that the world’s leading integrated natural rubber company will benefit from the increasing demand for rubber gloves due to the coronavirus pandemic.
STA has a market share of 8 per cent for global natural rubber consumption and 7 per cent for global glove consumption.
KTB Securities also pointed out that a weak baht at more than 31 baht per greenback will continue to support STA’s profit in 2020. The currency was trading at 31.9 baht per US dollar on Monday afternoon.
The securities firm expects STA’s profit to be around 2.9 billion baht in 2020 with 10.9 per cent gross profit margin, up from 8.1 per cent in 2019.
This is because rubber prices are more stable and the increasing demand for rubber gloves. There is also less competition for natural rubber as many other manufacturers in other industries, such as tire manufacturers, have halted production.
KTB Securities expects the demand for rubber gloves to continue to be strong. They also expect manufacturers to increase the country’s total production capacity for rubber gloves from 90 to 95 per cent, reaching 28 billion sets in 2020.
At the same time, non-medical demand is expected to pick up after the global outbreak is contained because of the new norm.
KTB Securities sets a target price for STA’s shares at 27 baht with a price-earning ratio of 14 times when compared to its prices over the past five years.
