Trying to Make Sense Bursa Investments
Top Glove: Production Capacity to Grow to 208 Billion Pieces by 2024
A week ago, when I wrote an article on one example way of gauging Top Glove's enterprise value (see here), I used all the publicly available information we had at that time. We had a clear idea of the company's expansion plans through the end of 2022, and we also had the total capacity projection by end of 2025 (193 billion pieces of glove at that time). However, in its latest investor presentation from Friday (5 March), Top Glove shared their plans until the end of 2024! You can see the presentation here - the expansion plans are detailed on pages 10-11.
According to the new plan, the company, which is currently by far the biggest producer of medical gloves in the world, will expand its production capacity to 111 billion gloves by the end of this year (+19%), to 146 billion gloves by the end of 2022 (+32%), to 178 billion gloves by the end of 2023 (+22%), and to 208 billion gloves by the end of 2024 (+17%). The total capacity growth from the current capacity of 93 billion gloves will be 123% within a period of a little less than 4 years. A reminder that Top Glove's production capacity a year ago, before the full-blown pandemic kicked in, was 73.4 billion gloves per annum, or 35% of the projected capacity by the end of 2024 (source). New capacity over the next 4 years involves the building of 11 new factories - 9 in Malaysia and 2 in Thailand.
The expansion plan is almost entirely focused on the highest profit margin, most in-demand segment - nitrile gloves. However, Top Glove have made an important change compared to previous versions of their investor presentation. The company has signified that the new production lines will be able to produce nitrile or latex gloves, i.e. they will be interchangeable. This will allow the company to be able to switch production based on present time demand dynamics. For instance, this interchangeability of the production lines is one of the reasons for the decreased delivery time for nitrile gloves in the last few months. This allows the company to produce more of the required gloves at times when demand (and therefore price) is higher.
Top Glove plans to expand its production capacity by 53 billion gloves per annum by the end of 2022, and by another 62 billion gloves per annum by the end of 2024. To give you a better idea of the scale of the expansion plan, the current officially published expansion plans of all the new players in the glove business in Malaysia (including acquisitions, and including foreign players acquiring/developing production facilities in Malaysia) is 51.311 billion pieces by the end of 2022 across 19 players (reference).
Important disclaimer: Any views expressed are for informational and discussion purposes only. None of this information is intended as, and must not be understood as, a source of advice. It is imperative that you always do your own research and that you make any decisions based on your personal situation and your own personal understanding.
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Discussions
8 people like this. Showing 17 of 17 comments
But pandemic will not be around by then.
All the produce will be given away to charity.
Buy 1 pair get 10 FREE.
2021-03-07 17:19
Well, the pattern of pandemic happening is 100 years apart.
The last known happened in 1920s..
In between, I can see in the quest to earn money you wish for death of others. What a noble wish!
2021-03-07 17:22
https://www.fastcompany.com/90580784/this-is-where-the-next-pandemic-is-likely-to-emerge
The new study notes that areas in Africa and parts of Asia are most at risk, both because of contact between people and animals and because of the other factors: While it’s possible that a pandemic could emerge in a location with good health infrastructure, it’s more likely to happen in areas where healthcare is underfunded.
2021-03-07 17:23
Coronavirus: This is not the last pandemic
https://www.bbc.com/news/science-environment-52775386
"So biodiversity loss can create landscapes that increase risky human-wildlife contact and increase the chances of certain viruses, bacteria and parasites spilling over into people."
There are certain outbreaks that have demonstrated this risk at the "interfaces" between human activity and wildlife with devastating clarity.
In first outbreak of Nipah virus in 1999 in Malaysia, a viral infection - carried by fruit bats - spilled over into a large pig farm built at the edge of a forest. Wild fruit bats fed on the fruit trees and the pigs munched on half-eaten fruit that fell from the trees and was covered in bat saliva.
More than 250 people who worked in close contact with the infected pigs caught the virus. More than 100 of those people died. The case fatality rate of the coronavirus is still emerging, but current estimates put it at around 1%. Nipah virus kills 40-75% of people it infects.
Prof Eric Fevre from the University of Liverpool and the International Livestock Research Institute in Nairobi, Kenya, says researchers need to be on constant watch in areas where there is a higher risk of disease outbreaks.
'Interfaces' between farms or human activity and wildlife habitats are hotspots for new diseases to emerge
Farms on the edge of forests, markets where animals are bought and sold - all are blurred boundaries between humans and wildlife, and places where diseases are more likely to emerge.
"We need to be constantly on the look-out at these interfaces and have systems in place to respond if we see anything unusual", like a sudden disease outbreak in a particular location.
"New diseases pop-up in the human population probably three to four times per year," Prof Fevre said. "It's not just in Asia or Africa, but in Europe and the US as well."
Matthew Baylis added that this ongoing surveillance for new disease is increasingly important. "We've created almost a perfect storm here for the emergence of pandemics," he told BBC News.
Prof Fevre agreed. "This kind of event is likely to happen again and again," he said.
2021-03-07 17:25
Ben Tan, Thanks again for obtaining the latest update from Topglove on its expansion plan. It looks like the expansion plan.is more aggressive in FY 2022 to 2024 compared with its earlier plans. Topglove is trying to reduce the leadtime further so that it can capture more customers. Customers may run away if leadtimes are too long.
2021-03-07 20:29
LimitUp, DickyMe, probability, HrryPttr, pjseow, Hoho22, Stockhunter88, LaoTzeAhSir, thank you for your comments.
DickyMe, if you believe that a capital-intensive business such as glove manufacturing works as you describe it, your understanding of the business of disposable product manufacturing is cursory at best. Expansion plans, as well as future selling price projections, are based on demand evidence and expectations.
pjseow, yes, I expected that and I think this is where the HK listing plays a pivotal role. Capturing a bigger part of the increased market as early as possible might be vital and that's where Top Glove appears to be heading.
2021-03-08 17:51
Just ignore DickyMe, he kena tiu at other forum also. Don't waste time teaching him. You just need remind him to take medication will do. haha
2021-03-08 17:58
Just at the time when global supply doubles or triples, the pandemic will be gone.
2021-03-08 18:42
But then, I suppose you can close production lines even faster than you can get them up and going. Let them remain idle until the next pandemic.
2021-03-08 18:45
@Ben Tan
The demand evidence you quote is a one off the ordinary due to the pandemic.
Such demands are like striking lottery based on catastrophic event and not repetitive.
2021-03-12 21:47
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