Top Glove announced it is committed to a Special Dividend of 20% on top of their existing 50% dividend payout ratio for 2Q-4Q of FY21. We are positive on this announcement as this should help offer some support amid recent share price weakness. We reflect in the special dividend announcement of additional 20% into our model, making our FY21 payout ratio to an effective 67% (from 50%; 70% is for 2Q-4Q). We maintain our BUY call with unchanged TP of RM11.05. Our TP is pegged to PE multiple 14x (-2SD below 5 year mean) tagged to mid-FY22 EPS.

NEWSBREAK

Top Glove announced it is committed to a Special Dividend of 20% payout in addition to its existing dividend policy of 50% dividend payout ratio on PATAMI for 2Q-4Q of FY21.

HLIB’s VIEW

Positive. We are positive on this announcement as this should help offer some support amid recent share price weakness and also reward shareholders.

Higher DPS. Revise FY21 DPS higher based on the newly forecasted dividend payout of 70% against our 2Q-4QFY21 projected earnings (from initial 50%). Note that DPS for 1QFY21 of 16.5 sen has already been paid out.

Forecast. We reflect in the special dividend announcement of additional 20% into our model, translating FY21 payout ratio to an effective 67% (from 50%; 70% is for 2Q-4Q only). We maintain our assumption of 50% dividend payout for FY22-23 pending further clarification.

Maintain BUY, TP: RM11.05. We maintain our BUY call with unchanged TP of RM11.05. Our TP is pegged to PE multiple 14x (-2SD below 5 year mean) tagged to mid-FY22 EPS.

Source: Hong Leong Investment Bank Research - 5 Jan 2021