Rubber Glove Holdings Review

13 July  2019

Dear Fellow Investor,

This week I will review our rubber glove holdings including Kossan and Riverstone as well as EWH, the Hong Kong country fund we hold in our PGWA accounts.

Kossan 1Q 2019 results were ahead of expectations  undemanding at PE 19 while big cap peers are at  an average of PE 31. This leaves room for further gains

The big overhang in the rubber glove industry has been oversupply but that pressure has eased as demand has caught up with supply. 

Kossan profits have jumped 32 % year on year which reflects in the up trending price. I am optimistic for more gains.   

Riverstone is listed in Singapore and has operations in Malaysia, Taiping, Thailand and a small presence in China. They have a market niche in clean room gloves for the semiconductor industry. They also produce for the health care sector.  Valuations are reasonable trading currently at a 32 % discount to peers. Earnings have been stable for the last 3 quarters. Lower raw material costs  add to their profit margins as well as the weak RM exchange rate versus the USD.

The company has very strong financials and should benefit with a recovery in semiconductors. We visited the company recently in Rawang and what stands out is their prudence and fanatical focus on innovation and managing costs .

The last holding I will review is  EWH.  EWH is listed on the NYSE and represents  25 blue chips in Hong Kong.  Many of these blue chips have exposure to China.

Despite the civil unrest in Hong Kong and  trade wars our EWH investment has held up well however;. I plan to take profit on our EWH and switch into a Singapore country/ REIT fund.

I read a research report on Hong Kong by an established broker and it details how smart money is moving out of Hong Kong and moving to Singapore. 

Cramped living quarters in Hong Kong

The report also details the reasons behind the riots. One is the frustration of the younger generation  toward the high cost of property and cramped living. Most  citizens have to pay exorbitant prices to buy or rent a small living space. They blame the government.

Singapore by contrast living is much more citizen friendly and an HDP flat is spacious and affordable. Like Hong Kong  taxes are low and business is encouraged but unlike their counterparts in Singapore they do not suffer from overcrowding, protests or civil unrest. I always like to invest were the citizens are happy.

Invest well and grow your wealth.
Bill

Critter of the week in a Russian spy whale which escaped its cage and swam to Norway. It wound up in a small coastal village and has become friendly to the villagers who pet his nose and play with it. I do not think this happy whale  will swim back to a cage in Russia.