SINGAPORE (Oct 15): Maybank Kim Eng has initiated coverage of glove maker UG Healthcare with a “buy” call and target price of 41 cents.

The company, which now trades at 55% discount to its peers, will be growing bigger as it is on the cusp of a major capacity expansion of 27% for FY16 and 32% for FY17. This will lift its earnings per share by 38% and 45% for the same two years, according to the brokerage in an Oct 14 report.

“The glove industry is resilient with strong growth potential from improved healthcare standards. Also, we expect UG to benefit from the strengthening USD against MYR and subdue raw material prices,” states Maybank Kim Eng.

What makes UG different from many other glove makers is that it makes its makes and sells under its own brand “Unigloves” instead of merely producing for other companies.

The brokerage’s target price of 41 cents is pegged to 14 times FY16 earnings, which is at a 30% discount to the peer average of 20 times. Maybank Kim Eng explains that the valuation discount is to take into account UG’s shorter listing track record and smaller size.

As at 11.03 am, UG Healthcare was up one cent to 31.5 cents.