What Investors in Singapore Should Know About The Gloves Industry

Rubber gloves manufacturer Riverstone Holdings Limited (SGX: AP4) has been a great performer in Singapore’s stock market since its listing on 20 November 2006.

From then to now, shares of the company have climbed by 475% in price alone, thrashing the 0.7% return of the Straits Times Index (SGX: ^STI) over the same period.

Given Riverstone’s performance thus far, the ins and outs of the rubber gloves industry may be of interest to investors. Here are some important things I found after spending some time digging for information.

A primer on gloves

A rubber glove is a simple product. It’s used mainly to prevent a user’s hand from having direct contact with whatever the user is working on. Traditionally, gloves were made from natural latex but customer demand has spurred innovations resulting in the creation of new types of gloves such as nitrile and vinyl gloves.

The gloves produced are sold mainly to the healthcare, food, and semi-conductor industries. South East Asia produces the majority of the hand gloves used in the world, with Malaysia, Indonesia, and Thailand accounting for the bulk of the production.

As mentioned, Riverstone Holdings is a part of the glove manufacturing industry. Some of the other main players are listed in Malaysia and they include Top Glove Corporation Bhd (KLSE: 7113.KL), Kossan Rubber Industries Berhad (KLSE: 7153.KL), Hartalega Holdings Berhad (KLSE: 5168.KL), and Supermax Corporation Bhd (KLSE: 7106.KL).

One of the best performing industries

Riverstone’s long-term price performance has been great. But it’s hardly alone. All the other Malaysia-listed glove producers (with the exception of Supermax), have seen their shares climb by at least 90% in the last five years; Hartalega and Kossan have been the standout performers with their shares up by 198% and 350%.

In comparison, Malaysia’s stock market as a whole has climbed by just 4% in that timeframe. For further perspective, the Straits Times Index is actually down by 11% in the last five years.

A growing industry

According to a recent presentation by Top Glove, the demand for gloves globally is expected to hit 190 billion pairs this year. What’s more, demand is estimated to grow at 6% to 8% per year for the foreseeable future.

Top Glove’s presentation had other interesting statistics. Developed countries (USA, Europe, and Japan) currently consume 68% of the world’s total gloves produced even though they account for only 13% of the global population. The rest of the world – the other 87% of the world’s population – is only responsible for 32% of global gloves consumption. There is thus room for growth in the gloves industry if developing nations catch up to the developed nations in terms of the consumption of gloves.

A Fool’s take

The gloves industry appears to have several promising trends working in its favour. But, it’s important to note that not every glove maker can turn out to be a winner from this point on. There can be a wide gulf between a favourable macro trend and positive returns from a stock.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.