What is the stock?
Ansell is the leading global supplier of industrial and healthcare gloves, with a market share of 15-20% globally.
How long have you held the stock?
We have held the stock since January 2018.
What do you like about it?
Ansell has transformed itself from a commoditised glove producer to a global integrated manufacturing process solution provider in the past 10 years. While profits have been buffeted by commodity prices from time to time, the management team has sought to reduce its exposure to natural rubber latex and has developed its own supply of specialised yarns, the largest important input cost for the industrial glove range. The company is also 18 months into a 3-year restructuring program, which will materially reduce its production and supply chain costs by consolidating manufacturing sites into key Asian locations. With a pickup in global growth, Ansell is well leveraged to benefit from increasing share of profits in driving efficiencies.
How is it better than its competitors?
Ansell is pursuing a strategy of increasing its leadership position by expanding share with key customers, particularly the leading global distributors. The key offer is a discount for volume approach, which has the advantage of also boosting the economies of scale at the group’s extensive Asian manufacturing base and its supply chain. While still early days, the company has enjoyed considerable success with this strategy with key US distributors in including WW Grainger, Fastenal and MSC.
What do you like about its management?
Under the leadership of long serving CEO, Magnus Nielsen, the management team has also focused on product innovation in its key industrial hand protection and surgical gloves segments. It competitors are generally divisions of larger multinationals or smaller groups. Ansell’s focussed approach, especially with regard to R&D spending and innovation, has seen it develop the widest offering and improve its competitive position with a constant flow of innovative hand protection solutions.
What is the target price?
The target price is $28.
At what point would you sell it?
When the stock reaches our target price.
How much has it added to your overall portfolio over the last 12 months?
The stock has tracked sideways mostly during the past 12 months amid market volatility and uncertain political backdrop.
Where do you see value?
Earnings season has turned out to be marginally better than feared and the share price has generally responded well despite tepid outlook statements. We continue to like businesses with offshore exposure such as Ansell, however we are beginning to see value appearing in some of the domestic facing businesses.
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