• Maintain BUY with Target Price of SGD0.32, offering 39% upside, pegged to 12x FY19F EPS.
• We met with management and came out optimistic on the outlook. In the new manufacturing block, an additional 500m (pa) glove capacity production should be in full commercialisation by Oct 2018 – this should bolster production efficiency.
• We forecast FY19 & FY20 net profit growth of 16% and 23% respectively – and we believe continued glove output growth will catalyse UG Healthcare share price upside.

Expect Stronger Earnings for FY19

UG Healthcare recorded FY18 net profit growth of 77%, on the back of revenue rising 20%. The new block with production capacity of 500m units of gloves pa (raising total capacity to 2.9bn) should drive FY19 output. FY19 utilisation rate is expected to be higher y-o-y due to production efficiency.

We forecast FY19 revenue and net profit growth of 14% and 16% respectively.

Source: RHB Invest Research - 24 Aug 2018