News sources has reported that Top Glove’s chairman, Tan Sri Lim Wee Chai recently highlighted that the group is actively pursuing M&A targets which includes glove companies, condom manufacturers as well as any other companies in the glove related business. The group is currently working with two banks including HSBC Holdings Plc and JPMorgan Chase & Co, to raise the funds needed for acquisition purposes. We understand the amount to be in the range of RM1bn. (Source: The Edge Financial Daily)

Comments: This is consistent with Top Glove’s growth plans as the group has always been on the lookout for M&A targets in order to sustain the group’s growth. However, we understand that the group has not reached advanced stages in its talks but are actively looking for suitable targets. We believe that this will be positive for the group’s earnings in the long term assuming that the group looks for companies which can add value to the group’s current operations and at a fair price. In the event that Top Glove ventures into a different but related business segment, we believe that the glove manufacturing segment would still be its main earnings contributor. Maintain HOLD with unchanged TP of RM8.95.

Source: Affin Hwang Capital Research - 3 Nov 2015