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Author: davidtslim   |   Latest post: Sat, 14 Nov 2020, 5:25 PM


Top Glove: Forward 3-Years Valuation (Davidtslim)

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Before Covid-19, almost all major glove companies in Bursa are in net debt position. This is mainly due to they continue to expand using the internal generated cash and bank borrowings and also paying dividend. The expansion is important for glove companies due to they can increase their economy of scale, market shares and competitiveness.

The world biggest glove producer is Topglove (26% market share) where it has make huge profit and cash flow from operation in past 6 months. With their cash, technical know-how and big order received lead to on-going aggressive expansion in coming 2 years. The competitiveness of Topglove in 2022 will be higher with their expanded capacity, customer base, brand and huge cash pile earned from 2020 to 2022.

Glove is a commodity product. Top 4 glove companies with their capacity can react to market needs, has established market reputation, connection with distributors, able to control glove market price to some degree to their advantage. Topglove in this case may have the biggest advantage due to its biggest capacity, diversified customers base, reputation and huge cash pile which new glove players hardly to compete with them.  

Table below shows the 3 year ex-cash PE valuation for Topglove:

Note: Ex-cash PE means PE without including cash, FY2021E (E = Estimate)

I like Topglove due to it has been effectively using its cash generated from operation to continuously expand to increase market share, at the same time rewards its shareholders with dividend (may has special dividend in FY2021 due to super normal earning). I like it treat minorirty shareholders as partners as they earn more, they pay more dividend. 

What is the fair PE for the world largest glove producer, strong growth in coming 12-18 months, net cash, strong operation cash flow with 50% dividend payout policy?

Personally, my fair valuation for Topglove in FY2021 is about 8x-9x (EPS 128c, TP of RM10.2 to RM11.55), FY2022-23 is about 16x-22x for the following reasons:

  1. World no 1 glove producer for Nitrile, Latex, and Vinyl gloves in term of production and highest revenue and profit in Bursa glove companies.
  2. Aggressive expansion with over 20% in 2020, over 15% in 2021
  3. Owning latex concentrate (raw material) factories in Thailand and currently building a Nitrile-butadiene concentrate (nitrile glove raw material) factory in Malaysia (land clearing work in-progress with plan to complete in 2 years time)
  4. High earning quality with strong operation cash flow generated from high net profit in FY2020,   FY2021 and FY2022 (possible to generate 18B to 20B cash flow from operation, 2020-2022).
  5. High dividend payout policy of 50% which may translate to about 60-63c for FY2021 (assume EPS 128c) with possibility of special dividend. This is relatively high dividend yield of 7.16% assuming 63c dividend at current share price of 8.8, which maybe this is the reason attract big institutional fund like EPF keep buying Topglove recently to become substantial shareholder.    

The cash generated from operation in FY2020-21 alone (13B) is enough to buy out the whole GENM (net debt of 3.3B as total Genm debt is 9.3B), or Inari+MPI+Uchitec (still got balance).

Of course, with the huge cash pile Topglove will become stronger in future with expansion, acquisition and reward shareholder with dividend and their on-going global Fortune 500 plan.

There are only two world no 1 manufacturers in Malaysia, one is Topglove, another one is condom producer.

If you holding Topglove for the past 5-10 years (even you sell before Covid), you will laugh all the way to bank but if you own condom producer for past 5 years, then you may cry all the way at home.


If you interested on my analysis report, please contact me at davidlimtsi3@gmail.com

You can get my latest update on share analysis at Telegram Channel ==> https://t.me/davidshare


This writing is based on my own assumptions and estimations. It is strictly for sharing purpose, not a buy or sell call of the company and the contents of this report should not be considered as professional financial investment advises or buy/sell recommendations. I strongly encourage you to do your own research and take independent financial advice from a professional before you proceed to invest.

I make no representations as to the accuracy, completeness, correctness, suitability, or validity of any information on my report and will not be liable for any errors, omissions, or delay in this information or any losses and damages arising from its display or usage. All users should read the posts and analysis the information at their own risk and we shall not be held liable for any losses and damages.


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Chart Stock Name Last Change Volume 
TOPGLOV 6.33 +0.31 (5.15%) 24,635,700 

  5 people like this.
tradeview Good analysis!
03/10/2020 3:19 PM
Philip ( buy what you understand) Did you own any before covid?
03/10/2020 6:33 PM
Targeted Dont miss the boat....... again!
03/10/2020 7:40 PM
somchik The world no 1 condom maker has joined the bandwagon to make glove too, price still dirt cheap 73 sen only , put your bet on , kikiki good luck folks
03/10/2020 10:09 PM
PureBULL ... this bio.war has proven more devastating than world war.
no WW can ever injure the US president!
this time it DID !

in WAR condition, many plc across the spectrum r sure to KAPUT.

very few can survive in 2-5 yrs.
only GLOVE stocks in msia r doing super well n growing BIGGER by every Q...
what r funds waiting for ?
04/10/2020 5:38 AM
slotonlinepulsa thanks information.. nice
04/10/2020 5:51 AM
paperplane this david i notice becoming an old man 打手, maxam last time hengyuan, blah blah blah crack spread bullshit
06/10/2020 1:14 AM
paperplane how come mkt cap stay same forever ........apa tu
06/10/2020 1:19 AM
paperplane whole calculation macam primary student math class......apa logic i totally no idea. calculate macam shiok sendiri. cost of biz never increase, capex same also every yr......hai ya.....uncle roger so con fu sing now.
06/10/2020 1:24 AM

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