Maybank Kim Eng has given a “BUY” recommendation on Sri Trang Gloves (Thailand) Public Company Limited (STGT) with a target price at ฿96.50/share, citing a solid profit momentum and with dividends for the company.
Despite the development of COVID-19 vaccine, the outbreak in the world’s major producer such as Malaysia and the ongoing lockdown in many countries should lead STGT’s 4Q20 profit to surpass +THB6.2b (+40% QoQ or +30 times vs last year) and continue rising QoQ in 1Q22, benefiting indirectly from problems in Malaysian producers. Maybank expected an average selling price (ASP) to increase at least +10% QoQ in 1Q21, continuing from the guidance of ASP +50% QoQ in 4Q20, where demand should surge towards the end of 2020.
Maybank revised its forecast up, although the valuation became less attractive from vaccine development and EPS that reflected the strong earnings. With a P/E target of 5.5x, in line with the big operators in the market, the roll-over target price of 2021 will increase to THB96.50/share, while maintaining a “BUY” rating, considering that STGT is becoming an attractive high dividend stock. Referring to STGT’s 30% dividend policy, it can pay 2021-22 dividend yields of 7.5% / 5.9%.