The Group’s gross profit margin was weighted down by competitive pricing environment, lower margin
product mix and lower margin contribution from our Vietnam factory as it is was semi-operational during the
period. This was partially mitigated by a reversal of overprovision of depreciation on building charge in the
previous quarters due to a change in accounting policy. The higher gross profit coupled with the lower
exchange loss and administrative cost in the current quarter compared to

Barring any unforeseen circumstances and based on the present trend of demand, the Board expects the Group
to achieve positive results for the financial year ending 30 April 2020. Our Vietnam factory was commissioned
in the 4th Quarter of FY2019. The new factory would increase our production capacity, strengthen our
distribution network and improve our support to our customers.

Superlon Holdings - A Global Leading NBR Foam Insulation Manufacturer
Author: HLInvest | Publish date: Tue, 9 Jul 2019, 10:24 AM

We believe the 30% plunge in share prices from YTD high of RM1.41 to RM0.98 is overdone and grossly priced in the softer FY19 results due to higher raw material prices, unfavourable forex, coupled with higher installation and start up costs in the Vietnam factory. Despite the headwinds, management is cautiously optimistic on FY20 outlook given the commissioning of

Vietnam plant, favourable USDMYR of 4.12 YTD (vs average 4.03 in 2018) and, stabilised NBR price. Valuation is undemanding at 12.3x FY20 P/E (16% lower than 10Y average of 14.6x), supported by 5sen net cash per share, strong 17% FY19-21 EPS CAGR and FY20-21 yields of 3.4-4.1%. Technically, the stock is grossly oversold and ripe for a LT downtrend line breakout amid bottoming up indicators.

Master in thermal insulation. Superlon is a leading nitrile butadiene rubber (NBR) thermal insulation manufacturer, which is primarily used for heating, ventilation, airconditioning and & refrigerator (HVACR) ductwork for residential, commercial and industrial buildings. Superlon is the domestic leader with over 55% market share and also a top 5 player in the world. Over 70% of its sales are exported to more than 70 countries worldwide. Its key markets are Asia (excluding Malaysia) & Oceania (~6

Oceania (~65% of total FY18 revenue) and Africa, America & Europe (8% of total FY18 revenue).

Positive outlook. According to Transparency Market Research, the global insulation market is expected to grow at a CAGR of 8% between 2013 and 2020 from USD37.8bn in 2013 to USD64.9bn as the industry rides on the increasing emphasis of energy efficiency and urbanisation, coupled with higher environmental awareness. Overall, Superlon’s products are major beneficiary of growing industrialization in emerg

emerging economies and global warming phenomenon. Volatile weather changes caused by the likes of El Niño and La Niña spurs demand for heating and cooling products, which drives growth for thermal insulation. Meanwhile, the better outlook for the construction industry in Malaysia should also have a positive effect on demand for HVACR solutions.