VIP Gloves executive director demonstrates confidence in nitrile glove strategy with on-market purchase

VIP Gloves Ltd (ASX:VIP) executive director WM Chen has demonstrated his confidence in the company’s nitrile glove supply strategy by purchasing shares in an open trading window period. Chen acquired 870,000 shares at 7.5 cents per share in a direct interest and now holds 47,020,948 ordinary shares in the company. Glove industry market trends VIP Gloves is encouraged by the market trends in the glove industry with the average selling price of gloves for its peer Top Glove (KLSE:TOPGLOV) growing 201.8% year-on-year for the quarter ended November 30, 2020. Thanks to margin expansion and better economies of scale, Top Glove’s 1QFY21 EBITDA margins rose 54.1% year-on-year (yoy) to 70.2%, despite higher raw material prices (nitrile latex: +24% yoy, natural rubber: +18% yoy). Top Glove has also declared its first interim dividend of 16.5 sen per share. This represents a 56% payout (50% usual dividend policy + 6% special). Order book full to end of 2021 VIP’s sales order book for nitrile gloves has increased and is currently full for delivery up to the end of 2021. To fulfil its existing sales orders and to enable the company to commit to new orders, VIP Gloves is urgently pursuing completion of the installation of new production lines. Progress for the installation of new production lines is progressing well, with lines 5 and 6 targeted to be completed by December 2020, and lines 7 and 8 due to be completed by April 2021. Executive director WM Chen said: “Our factories are currently working 24/7 to fulfil the existing orders and new orders are still coming in with higher average selling prices.” Average selling prices (ASPs) have continued to rise over the last several months due to increased demand. The company anticipates a 50% increase in the ASP for the current quarter ending December 2020, from the US$50 per 1,000 pieces achieved in the July to September 2020 quarter.