Highlights

KL Trader Investment Research Articles

Author: kltrader   |   Latest post: Wed, 25 Nov 2020, 11:40 AM

 

Top Glove - Results Disappointed

Author:   |    Publish date:


But We Expect Improvement Ahead; Maintain HOLD

  • TOP GLOVE CORPORATION BHD's 4QFY19 net profit was below our/consensus expectations on weak sales from stiff competition in the latex segment. However, competition has subsided and we expect Top Glove to benefit temporarily from the trade war.
  • We reduced our FY20-21F EPS by 11-13% and introduce FY22F. Our Target Price is also reduced to MYR4.30 (-11%), pegging to an unchanged CY20F P/E of 26x (10% discount to our target P/E for Hartalega).
  • Our preferred pick is Kossan (BUY, Target Price MYR5.10) for its exposure in the non-medical segment and undemanding CY20F P/E of 22x.

Results Below Our/consensus Expectations

  • Top Glove's 4QFY8/19 net profit of MYR80m (+7% q-o-q, -21% y-o-y), brought FY19 net profit to MYR371m (-15% y-o-y) and made up 93%/90% of our/street’s full-year estimates.
  • The company also declared a final DPS of 4sen, bringing full-year DPS to 7.5sen (-12% y-o-y), representing 51% of FY19 net profit. See Top Glove's dividend history.

Affected by Stiff Competition in Latex Segment

  • Despite a higher overall ASP (+5% q-o-q), revenue was flattish q-o-q on weaker sales volume (-5% q-o-q). There was volume weakness in the latex segment (-12 to 23% q-o-q), potentially due to competition from Sri Trang (SGX:NC2).
  • Nitrile volume was stronger (+12% q-o-q), potentially due to a faster demand for its nitrile non-medical gloves, a result of the structural demand shift from plastic vinyl. Its plastic glove recorded weaker revenue (-17% q-o-q, -54% y-o-y) and wider EBIT loss of MYR4m (3QFY19: MYR2m);
  • Aspion sank into a pretax loss of MYR4m (3QFY19: MYR4m PBT) as the operation of the sterile vendor was affected.

Temporary Boost From US-China Trade War

  • Earnings may improve in 1QFY20 on strong demand for its nitrile glove following US 15% tariff on China’s rubber examination gloves. Also, we understand that the latex gloves sales have also improved slightly, potentially due to better global demand.
  • Nevertheless, we reduce our FY20-21F EPS by 11%/13% as we trim our ASP assumption for latex glove by 3% p.a. as we think stiff competition may recur given Sri Trang’s ambition of becoming world’s top 3 glove producer (5th largest now).

Source: Maybank Research - 27 Sep 2019

Share this
Labels: TOPGLOV, KOSSAN

Related Stocks

Chart Stock Name Last Change Volume 
TOPGLOV 6.99 0.00 (0.00%)
KOSSAN 6.07 0.00 (0.00%)

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Stock Screener using Technical and Fundamental criteria
MQ Affiliate
Join the MQ Affiliate Program today to earn rewards
 
 

2170 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 SCOMNET 2.010.00 
 KOTRA 3.130.00 
 UCREST 0.150.00 
 GENM-C73 0.0050.00 
 PUC 0.1750.00 
 WILLOW 0.430.00 
 EAH-WE 0.020.00 
 IRIS 0.360.00 
 TOPGLOV-C79 0.2150.00 
 BTECH 0.500.00 

FEATURED POSTS

1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!
PARTNERS & BROKERS