Sunday, 21 June 2020


1. Malaysia’s leading thermoform food and beverage packaging manufacturer that is set to benefit from more stringent hygienic standards in a post-COVID world.

2. New forays into face mask and face shield manufacturing offer attractive double digit margins, higher ASPs, and a positive addition to existing businesses.


3. The price of resin  (which makes up more than 50% of operating cost) are currently near 10-year lows. Lower costs means improved margins going forward.

4. For its F&B packaging products, SCGM has moved into producing higher-margin offerings, offsetting lower revenues with an improved bottom line.


5. The company is well positioned to capitalise on the change in consumer trends (preference for standalone F&B packaging such as ready-to-eat trays, meat trays, salad bowls) and higher health standards (regular usage of face masks and face shields for day-to-day or work purposes) amid the COVID-19 pandemic.

6. Since February 2020, SCGM allocated RM1 million to purchase 5 ultrasonic sealing machines to make face shields and one new face mask machine.

Face shields production capacity : 21k pieces per day

Face mask production capacity : 50k pieces per day

7. The investment is reaping immediate rewards as the pandemic worsened globally; SCGM supplies to local hospitals and pharmacies. Sales from these ventures will be immediately recognised in the latest reporting quarter.

8. From 18 Feb to 31 March 2020 (just 1.5 months), the Company recorded sales of RM2.9 million from its face shields production.

9. At optimal production capacity, the new businesses can potentially generate > RM4 in sales PER MONTH. Remember that the capex outlay for the machines was a mere RM 1 million.

10. As at 9MFY20, exports accounted for 35% of total sales. The company can utilise its existing distribution network and key contacts in the US and Europe for its new healthcare venture, with demand still outstripping supply in emerging/developed nations where COVID-19 still has not peaked in terms of average daily confirmed cases and fatalities.


11. Stock price performance:

April - 19 June 2020 : 71%

May - 19 June 2020 : 27%

June - 19 June 2020 : 1% (recovery to RM1.84 from a recent low of RM1.60)

Price performance last week, from trough to closing : 15%

12. Last close at RM1.84, suggestive of resilience amid broader market volatility and positive pre-earnings expectations.

Comparison with healthcare sector stocks since beginning of June:
less impacted than glovemakers' big fall recently

13. Target Price : RM2.20 (PublicInvest, Trading Buy rating), with the facemask/face shields ventures potentially being an upside rerating catalyst. 20% upside from current levels.

14. The new business contributions, and the prospect of improved margins, are set to be reflected in SCGM’s upcoming quarterly earnings, set to be released by 30 June 2020 (next 2 weeks).

15. PublicInvest’s 17x projected P/E is well within the historical average (FY18 : 16.2x) with the company rebounding from a net loss in FY19.

16. The earnings contribution from the new healthcare businesses have not yet been imputed in PublicInvest’s earnings projection for FY20-22, which is suggestive of further upside.

PublicInvest Research Reports : 31 March 2020 and 1 April 2020
RHB Investment Bank ’20 Jewels 2020’ Research Report
Bursa Malaysia filings

Monday, 8 June 2020


From the Editor-In-Chief of the Pelham Blue Fund

It's a bubble. A feeding frenzy. An impending catastrophe.

In half-open coffeeshops all over the country, it's what everybody's talking about. A seemingly never-ending love for gloves, and any stock with a whiff of healthcare in them.

Suddenly, everybody's opening trading accounts. Everyone wants to try the trading gig, because easy money is here, and if we were to gauge the general sentiment, easy money is here to stay.

I kept hearing all sorts of anecdotal stories. A man throws his life savings into buying SUPERMX warrants. A banker gets distracted all the time during her meetings because she had to check the steady ticks of TOPGLOV stock in her mobile trading app.

And my personal favorite : a WFH friend in the oil and gas industry who goes on Zoom calls for a high-powered business meeting, with his four trading monitors just out of sight on his live video feed.

He has a soft spot for a low-tier glovemaker trading at 100 times earnings. I have a soft spot for calling him a dumbass.

Still, by luck or skill, this historic rally has minted some crazy rich Asians. One estimate pegs the total wealth creation caused by the increase in glove stocks at RM70 billion.

And that's just from the stocks. Some also bought the warrants, and hit jackpot.
Source : NagaWarrants Telegram

I have my own story. I wouldn't exactly say I came of age as a trader in this MCO/gloves market mania, but I have made enough from the rally to talk about this subject with some measure of conviction.

But funnily enough, I don't have much of a technicals viewpoint to offer here because the fundamentals perspective is far more interesting. I believe this hasn't been talked about enough, and it's time that we really pay attention to the numbers. 

So for a moment, let's cease the hyperbole. I'll try to cut through the bullshit for you. 

But why should you listen to me? Because I'll be honest : every day I vacillate between two completely opposite viewpoints: 'this fucking gloves rally is the biggest bubble since Dutch tulips' and 'this fucking gloves rally is a profit opportunity of a lifetime'.

I'm uncertain. I'm indecisive, for sure.

But here's the thing: it does not hinder my trading. I have already made profits in both huge rallies and in precipitous collapses in the sector. As a team, we have traded the sector far before the age of Covid (BC), and during. Mother share, warrants, all of them. All kinds.

Just some selections. Some are my personal victories, some are that of our team members. We are on the lookout for more opportunities like these.

  Our cumulative gains in selected glove stocks, February to June 2020

I have been obsessing over this gloves sector story for a while. Having read a truckload of research reports and their fantastical findings over the past few months, my first gut reaction was to be totally incredulous.

I was dismissive, although as per the norm, the negative attitude comes from a place of anti-learning. I just needed to take the time and think of the situation.

In truth, I couldn't make up my mind. Either it's a bust or a boom of a generation. Reading the financial news does not help in the slightest.

I have studied market manias. I have traded a few of them. But this is new to me.

My thinking about market manias can be summed up as follows:

Speculative manias fizzle out when the fundamentals (or lack thereof) catch up to lofty expectations.

But what was perceived to be speculative manias can suddenly turn into a legitimate value proposition if the fundamentals are actually supportive of the lofty expectations.

So is there such a thing as a fundamentals-driven mania?

As I've said, I'm trying to cut through the bullshit and hyperbole. To do this, I had to forcibly let go of all perceived biases.

I'm giving this mania a chance to make sense, at least on a personal level, to me.


Let's go back in time for an imperfect, but useful, historical analogue.

In 1973, the Organisation of Arab Petroleum Exporting Countries (OAPEC) declared an oil embargo on the United States for its support of Israel during the Yom Kippur War. 

This was economic weaponisation. OAPEC effectively introduced a supply shock into the world by cutting off US access to its oil. There was not much in the way of substitutes at the time. As the dominant oil supplier, the Arabs get to throw their weight around.

The effect? Miles and miles of long lines at US gas stations. Oil prices shot up 400% in six months (this was back when they were trading at the single-digit per barrel range).

So why is the comparison to the oil embargo that happened 47 years ago appropriate to what is happening now?

It's because gloves are a commodity. And commodities respond to supply-demand dynamics. 

Covid-19 has triggered a demand shock for gloves on a truly global scale, the kind of which will be talked about... well, 47 years from now.

Maybank IB report on TOPGLOV, 29 May 2020

Prices are shooting up, and by all accounts, demand for gloves has exploded exponentially.

Economics 101 applies here. Supply rises to catch up with demand. Eventually you will have equilibrum, and then we get more supply than demand. Prices go down. 

That commodity's selling price determines the seller's margins and ultimately profitability. Basic stuff. 

We know that supply and demand dynamics are cyclical. So should we scream 'bubble' every time we are in an upcycle?

The gloves sector is merely at the beginning of this phase, and there is a considerable amount of time until the dynamic balances itself. You can plausibly invest in the sector and exit with massive double digit gains within two years. That would be a big score.

But the really big score actually lies in the Big 4 - TOPGLOV, KOSSAN, HARTA, and SUPERMX. As a collective, they have enough scale, and enough of a protective moat, to dominate the bulk of future revenues in this sector over the next two years.

Even with current valuations, these are the stocks going up that can stay up. Because the fundamental justification for it is there.

Why specifically two years? It's because (no) thanks to Covid-19, tens of billions (of pieces) in future gloves demand has been brought forward into the present, today. Most of this year, and next year, is where we will see the bumper earnings.

If you can plausibly time the upcycle, would you invest in the relevant companies? At what point does the mania gets reclassified as an upcyle?

When in doubt, always go back to the fundamentals.


Maybank IB report on TOPGLOV, 29 May 2020.TP:RM20.

We become truly uncomfortable when a game-changer catalyst upends our established world views, none more so in the subject of stock price valuation.

When prices get ahead of our expectations, and our perception of how much certain stocks should be worth, we tend to retreat into dogma. The typical way to cling on to our own set of values is to denounce, reject, and ridicule all contrary views. 

So let's entertain some of these farfetched notions related to glove counters right now.

Why would you buy a stock that currently trades at 50-100 times their historical earnings multiples?

The headline figures are as described: it's historical. If the world's largest glovemakers - already insanely profitable in normal times - are expected to double their annual profits due to the demand shock, those uncomfortable P/Es would undoubtedly come down. The 'E' catches up with the lofty 'P'.

I don't understand the loopy logic that one can only invest in a stock once the P/E comes down. By this time you would have totally missed out on the price gains, but you still say that's the point where people can come in and invest?

In effect, this explains the seemingly insane (at first glance) target prices for TOPGLOV by Credit Suisse (RM23) and Maybank (RM20), but they are not insane.

Their respective analysts simply imputed future earnings potential into their target prices. And when earnings catch up with the price, the P/E would come down to... well, merely the historical averages for the sector. About 30 times earnings, to be specific.

Again, it's not exactly fairytale stuff. In a world where all major glovemakers are expected to nearly double their earnings, the 'P' would be more than justified at current levels. And as you may have seen from recent target price upgrades for the Big 4, there's some ways to go.

What we have a two-year hypergrowth situation. Or to put it another way, glovemakers are currently  fetching valuations normally reserved for tech companies, most of which will continue to trade at 50 times P/Es for the next 20 years (like dangling a carrot in front of a treadmill... you can chase but you'll never get it).

Another example. IHH Healthcare Bhd rather famously traded at 50 times earnings for more than half a decade since listing. One explanation is that investors are clearly convinced of its growth prospects, and thus bought into the stock at current levels in anticipation of future earnings catching up.

So is anyone calling it out for being a bubble?

IHH Healthcare Bhd financial summary. CIMB Report, March 24 2020

My point is : why should glovemakers treated any differently? They didn't trigger their own ridiculous price rallies. Supply and demand dynamics did.

How about the argument that retail investors are the only ones nutty enough to chase SUPERMX at RM8, when it was trading at RM1.70 in February?

Our industry sources tell us that even in recent weeks, investment banks are still holding regular conference calls with institutional investors and fund managers to discuss... glove stocks as a buying opportunity. 

These folks, with their billions of dollars in deployable cash, can only invest in the Big 4, because these are the only counters big enough to accumulate in size, and big enough to make their money work for them.

Chasing is still chasing, whether you're a retail day trader with a cash upfront account or a billion-dollar international hedge fund. That target of that chase is yields.

The world is in the midst of a painful recession. There is intensifying demand for (bubble-proof) stocks that can deliver on the scarcity premium : the fortunate ones who would deliver world-beating returns in a Covid-19-driven downturn.

Malaysia contribute nearly two thirds of the world's global gloves sales. The world is desperate to get ahold of them.

The Big 4 are offering yield opportunities quite unlike any other non-healthcare stock in the world right now.

Why shouldn't investors be desperate to get ahold of glove stocks?

The Big 4's performance in May 2020 up to the early days of June


Let's talk a bit about the alternative choices.

My preference for the Big 4, instead of the second tier players like COMFORT, RUBEREX, and CAREPLS, comes down to several factors.

1) The investor base is primarily retail driven, hence they are much more vulnerable to sharp price swings.

2) There has been tremendous hype and chatter over these counters when they were 100% up in April. After another 100%+ increase in the stock prices, that chatter has not just died down, it has in fact intensified.

3) Their profit growth prospects are admittedly tremendous, but mainly due to the fact that all of them are starting from a very low base. They are nowhere near in terms of the Big 4's sheer scale of operations.

There are other risks inherent in the second-tier players, namely that if they command 100 times earnings multiples right now, it is less certain that their earnings growth will bring back those P/Es to more reasonable levels.

Some have just established new production lines. Some have just raised cash. Some have just begun being hyped by rich uncles. Emphasis on 'just', because in the game of gloves, timing is everything.

From a purely economies of scale basis, the second tier players will always be second best to the Big 4. They will always be playing catch up. Their overall production volumes will remain tiny, compared to say, what HARTA alone produces in any given month.

Making gloves is not that hard, but there are certain nuances in the business that will get the dominant players farther ahead.The little things do add up.

The Big 4 specifically possesses inherent advantages that will ensure the bulk of the business (glove orders) flow to them. It's a kind of protective moat that I would put a premium on.

What are they? Let me take a deep breath here...

You need really solid QCs. You can't run afoul of the US FDA standards, otherwise you'll end up with 100 containers of unusable gloves. You need an established global sales network. You should ideally have loyal and repeat customers who have kept coming back. You need to be experienced and credible enough to have done direct negotiations with foreign governments and their health ministries. You simply cannot deliver a batch of shoddy gloves when frontliners around the world need them to protect their lives. Your history of success supplements your reputation. Trust, quality of product, and delivery, are not expected to be an issue.

I don't mean to knock off the non-Big 4 names. It's just that their share of the spoils, even on a cumulative basis, will be much smaller compared to say, what SUPERMX will be getting in the coming years.

The overheating and speculative elements are far more acute in the non-Big 4 healthcare stocks, because there is slightly less assurance that their bumper earnings will materialise as hoped.

 This is NOT an issue for the big fellas.


Another piece of the puzzle : how do we account for these future sales and ensure that they actually translate to real orders, and real earnings?

Two words : spot orders. 

The Big 4's protective moat is evidenced by the customers' intent to acquire their product, no matter the price. Customers know that these guys can deliver; they just need to pay up.

For the first time, glovemakers have real leeway to adjust pricing, in a business that is notoriously thin in margins. Average selling prices are shooting up, again justified by the demand shock.

In a real demonstration of the extent of this demand shock, the sellers are dictating not only the prices, but also the terms. 

To lock in their orders, customers are now required to pay advance deposits.

In other words, the Big 4 are actualising part of future sales, today. In real money. That earnings bump is assured.

Based on one estimate, spot prices have gone up from $25 in pre-Covid times to $100 presently. That's a 300% increase. Exponential.

TOPGLOV sales orders and spot prices, from Credit Suisse's report on 3 June 2020. TP: RM23.

Lead times have quadrupled. Instead of 35-40 days to wait for your bulk order, it now takes up to a year!

40 days to 365? That's an 800% increase. Exponential.

TOPGLOV has an annual production capacity of 78.7 billion pieces, from 700 production lines. And you say that their backlog runs up to a whole year?

Or how about new orders doubling within months? 100% growth, you say?

And of course, the Big 4 have the capacity to take the billions in additional orders, and even then the demand shock does not let up.

 SUPERMX order book increase, from CGS-CIMB's report on June 2 2020. TP: RM9.80

 Net profits can rise 79% within a year and it would still be cheap relative to the sector average?

From the same CGS-CIMB report

As a trader, I'm not dogmatic in my views. I get things wrong every single day.

But pervasive skepticism - in the face of actual, solid fundamentals - could be a big buy signal. The real question is : what price are you willing to pay for exponential growth?

I would be slightly more surprised if a stock like say, SUPERMX, collapses to RM2 at any point over the next two years. Less surprised if it hits RM11.50, for the reasons described above.

My personal view : the biggest profit opportunities are in companies that you can both trade and invest in.

The fundamental justification is there. I'm neither worried nor confused. You shouldn't be, too.


Monday, 1 June 2020


Update, 5PM, 4 June 2020: The Pelham Blue Fund VIP Telegram Group is now closed to new subscribers.

From the Editor-in-Chief of The Pelham Blue Fund

To our Subscribers, and those who are interested to join, 

Let me get out the clichés first, though we are completely genuine in our sentiments : we continue to be humbled, astonished, and grateful for your support.

If you are reading this, you probably like us enough to follow us on Twitter, or follow our Facebook, or browse our blog from time to time. It still blows our minds that people are interested in what we do, having languished for years with a combined blog and social media audience of maybe around 15 people in the beginning.

I'm just a trader trying to make ends meet. I don't even dare to call myself a professional one, as the guru label brings me great distaste. But I know by now that we are extremely competent at what we do.

Our ideas hold real value. And I am confident enough to say that whoever subscribes to our services - especially at current prices - are getting an absolute bargain.

Our record speaks for itself. Our VIP members have witnessed us undertake trades that yielded 100%, in real time. Others yielded five figure profits in mere minutes. These are not flukes; sometimes we lose money on our trades, but the gains more than make up for them.

It is not just us who benefits. I have personally seen members make multiples of what they pay to subscribe. One was 20 times our fee. Another was 50 times. We dispense advice and make money (from our own calls, of course) fairly consistently.

I know exactly how much our ideas are worth, because we trade each and every one of them. I am confident that our members can also see that what we provide is completely unlike any Telegram or educational service that are available elsewhere.

There are no dodgy promotions. No weird penny stock pitches. No bullshit. Just pure trading. If you want guidance on trading, you have come to the right place.

The changes that we are instituting here is not about money. In fact, we are actively turning down new members and membership opportunities, for reasons that I will go into shortly.

It makes my day, on a deeply personal level, to see our VIP members make real money from trading - and all the better if it was the result of our specific trading guidance, rather than just following our trading calls.

While we are extremely grateful for our public presence, and this amazing community of our thoughtful VIP members and social media followers, we do not harbour aspirations of empire.

At the risk of sounding pretentious and self-absorbed, the money is not the reason I do all this. What I value most is knowledge, and independent thought. Trading is the culmination of this.

Most people look at money as the end outcome to trading. I look at it in the complete opposite way. It is money that is the means to an end. And that end is knowledge accumulation. 

My idea of wealth is in the things I get to know, discover, and learn, not the amount of money I have at the end of the day. What we learn, we share with you. That's what this Group is all about.

What I want to achieve - aside from sharing that knowledge with likeminded members of this Group - is to find ways not just to maintain our performance, but also the quality of our trading guidance.


But of course, this blog is all about money-making. Which is where we go back to our core principles.

In this line of work, the most money is made by maximising current resources to generate the most optimal output. For me it's three things - time, capital, and ideas.

With an ever larger number of subscribers, our capacity to dispense thoughtful advice diminishes. Out of respect to all our subscribers, we never miss a single question asked, unless if we had genuinely overlooked it.

It takes up a fair amount of our time and resources, on top of the personal trading, market research, and other things that we are working on simultaneously. All day, all night, all the time.

If the group grows to 10 times its current capacity, we will simply be unable to cope. Our chat group will be overloaded with chatter. Members may miss out on our replies (the way I sometimes miss out on the questions).

This is simply not what I want or desire out of this venture.

I have neither the time nor the inclination to grow this part of my business exponentially. We have mostly ceased our marketing efforts and let our results - and especially our members' results - speak for themselves.

We are done with trying to prove our capability as traders; aside from our VIP members, we have no one else to convince going forward.


At the same time, we are also facing some growing pains. We have recently discovered that many of our calls get leaked from the private Telegram Channel and Group and forwarded to others, diminishing the trade's potential in some cases.

In this regard, we count ourselves lucky that many of our insights have a finite shelf life. That day trading idea would be fully realised by the time word gets out, allowing us and our members to exit the trade before it gets flooded by new entrants.

While leaks - and to our dismay, non-paying individuals who continue to benefit from our trading ideas - are not something we can avoid, it is the consequence of having a growing profile.

What we can do, however, is to continue providing guidance and maintain the quality of our trading advice to our VIP members who have spent hard-earned funds for this access.

To ensure that we have adequate time and resources to address our members' queries and provide guidance that is worth the paying fee, we will limit the number of one-year VIP subscribers in the VIP Group to 300 members at all times. This total does not include our Lifetime members.

We are not there yet, which means some slots are still available for those who are keen to join us.

From this limitation, we expect a natural rate of attrition: in each month, there will be subscribers who opt to exit after their first year (or second) anniversary is up, which opens a slot for a new subscriber to join.

If you are keen to subscribe for the one-year option but slots are currently unavailable, you will be put into a waiting list. Subscriptions will be on a first come, first serve basis, and we will be in touch to offer you the next opening.

The only option that will be available at all times is Lifetime membership.

Indeed, the closest comparison for this structure is essentially a university semester. It reflects the limitation of our resources, and our priority to maintain high standards.

The VIP Telegram service should be seen as an educational platform, not a quick gateway to riches, because there is no such thing.

For our 300 subscribing members under the one-year option, we will be able to allocate enough of our capabilities to assist each and every one of you with trading guidance.

This is our commitment, and my personal promise.


Aside from Lifetime members, all new and existing subscribers are entitled to a maximum subscription period of two years. This includes the 1+1 subscribers or the few who (very astutely) paid for the two-year subscription when it was still offered.

At the same time, we will honour all existing obligations to our current subscribers, with no adjustments that would be detrimental to them. There are no changes to the subscription periods, or the level of service we currently offer. The pricing that you get is as stated in the email correspondence that you get.

In the current structure, 1+1 means the one-year option, plus the one year extension. This will continue.

After the second year is up, subscribers have the option of converting to Lifetime membership, or to conclude their subscription and exit.

As per our current policy, subscribers may also opt to convert to Lifetime membership after their one-year subscription is up. This does not change.

However, we note that the change in pricing for all subscription options - which affects new subscribers only - is subject to our complete discretion. What this means essentially is one thing: prices will change in the future.

As is always the case, those who subscribe to our services early, or convert to lifetime membership early, will always benefit more than those who subscribe later, purely on the basis of pricing.

For full disclosure, please refer to our Terms & Conditions.


I am also instituting a key change in our criteria for Lifetime membership.

From now on, acceptance to the Lifetime membership is at our complete discretion. I will personally vet applicants and their motives, intentions, and reasons for conversion.

We do not want our ideas to become a hub for some syndicate, insider trader or illegal money-making operation, hence the need for this. There are other chat groups or websites for that. Those who do not ascribe to our values and conditions are advised to look elsewhere.

We reserve the right to reject applications for Lifetime membership.


Here's the TL;DR version.

1) VIP Group limit : 300 members for the one-year subscribers' portion.

2) If no slots are available, there will be a waiting list.

3) Lifetime membership approvals is at our complete discretion.

4) We will honour all existing obligations  to our current subscribers, at no detriment to them, with no change in service provided.

Thanks for reading, and for being part of this investment journey with us.

More Tales By The Pelham Blue Fund