The decline of Sri Trang Agro-Industry Public Company Limited (SET: STA) and its listed subsidiary Sri Trang Gloves (Thailand) Public Company Limited (SET: STGT) continues, heavily pressured by a decline in average selling price (ASP) of rubber gloves.
STA has lost 15% of its share price since the beginning of this year and 51% from its record high of THB54 per share on February 25, 2021. Meanwhile, STGT sees a drop by 17% this year in share price and 49% from its record high of THB49 per share on May 18, 2021, intraday. Evidently, both securities are being sold at a rapid pace. The Relative Strength Index (RSI) indicates 7.69% for STA and 15.38% for STGT.
The fall started in mid-late 2021 as the forecast of ASP for rubber gloves points to slow down, following a mass rollout of vaccination programmes globally, which alleviated buyers’ urgency to stock up on gloves.
Hong Leong Investment Bank Bhd stated in late 2021 that glove prices had fallen closer to pre-Covid levels. The ASP at the time was at US$25-35 per thousand pieces, compared to the pre-pandemic ASP of US$21 per thousand pieces.
Similarly, the world’s largest glove producer, Top Glove Corporation Berhad also faces the same situation. The share price has plummeted 22% year-to-date and 1,000% from its record high in October 2020, following the ban from the U.S. over allegations of forced labour. The company reportedly suffered RM3.6 billion ($860 million) export revenue loss during the U.S. import ban.
Kossan Rubber Industries Bhd, another world’s leading rubber gloves producer in Malaysia, recorded 6.25% decline this year and more than 270% from its record high in August 2020.
STA may have a little more cushion in this situation due to being a parent company of STGT with the Technically Specified Rubber business segment that accounts for 52% of its revenue. The International Rubber Study Group (IRSG) estimates that global NR demand in 2022 will be 14.3 million tons, growing 3% from 2021, with the largest consuming countries being China, Europe, India, the US and Thailand. The growth in demand from India and the US is expected to be higher than the overall growth in global demand, driven by higher consumption. Likewise, demand from Thailand and Malaysia is also expected to be higher, fueled by demand from glove producers.
Despite a series of decline and mixed recommendations from analysts, the consensus target prices for STA and STGT are still higher than their current price. The target price for STA is THB34.10 (+28.6% upside) with 5 buy recommendations, 2 hold, and 1 sell. Meanwhile, STGT’s target price is THB32.74 (+28% upside)with 2 buy recommendations, 2 hold and 7 sell.
