KUALA LUMPUR (June 18): Investors should now buy shares of Top Glove Corp Bhd (KL:TOPGLOV) even as the world’s largest glove maker by volume may report another quarterly loss and stay in the red for the second year, RHB Investment Bank said.
RHB IB upgraded its recommendation for Top Glove to “buy” from “neutral” previously, citing improving investor sentiment from “favourable” operating dynamics. RHB IB joins a very small minority with a “buy”’ call out of more than two dozen research houses covering Top Glove.
Top Glove “is poised for a meaningful share price recovery in 2024”, RHB IB said in an earnings preview note. The stock is also high beta, the house noted, meaning that it has relatively higher risk and returns that come with higher volatility.
The company will probably report a core loss of RM40 million to RM45 million for the third quarter ended May 31, 2024 (3QFY2024) versus RM66 million in 2QFY2024, according to RHB IB’s forecast. Top Glove is scheduled to release its results on June 19. Both volume and average selling price (ASP) are expected to recover, RHB IB noted.
However, a 5%-6% rise in natural gas tariff will probably drag on Top Glove, while natural latex has climbed 12% and acrylonitrile was up 3.6%, adding to raw material prices.
Analysts are mostly bearish on Top Glove, with 10 out of 22 research houses featuring “sell” calls and eight on “hold” ratings. Four, including RHB, have “buy” recommendations. The consensus’ 12-month target price is 91 sen, implying a potential decline of 25% from the current price.
So far this year, Top Glove’ shares have risen over 30% on Bursa Malaysia amid investors optimism for a turnaround in the industry beset by oversupply from massive capacity expansion and lacklustre demand, following overbuying during the pandemic.
Top Glove peaked at RM1.26 in mid-May after the US raised tariffs on Chinese rubber medical and surgical gloves effective 2026, as smaller rivals also surged following the news.
At 10.04am on Tuesday, Top Glove was up four sen or 3.42% to RM1.21, after 18.4 million shares changed hands. Its market capitalisation stood at RM9.93 billion.
“We learnt that the industry operating dynamics has turned favourable for glove manufacturers as we understand that customers are more receptive to the ASP increase in the coming months,” RHB said, noting that Chinese glove makers have also raised their ASP.
Demand, meanwhile, has picked up, with total industry exports volume growing 6% quarter-on-quarter in the first three months of 2024, which indicates that “the recovery momentum of global glove demand remains healthy,” RHB IB added.
The company in March reported a narrower net loss of RM51.19 million for 2QFY2024, bringing total net loss to RM108.91 million for its first six months.
While it has managed to narrow its half-year net loss compared with the previous year of RM332.90 million, results came in worse than consensus’ estimates, which called for a full-year net loss of RM69 million, amid lower-than-expected margins.
On its part, Top Glove executive chairman Tan Sri Lim Wee Chai said the company is optimistic of returning to the black as early as August this year, citing further pickup in demand for gloves after two years of inventory destocking due to excess capacity built up during the pandemic.
The company is betting on revenue jumping over 20% in 3QFY2024, after it observed increasing sales for March and April as well as an upward adjustment of the ASP of gloves.
Nitrile gloves' average ASP per 1,000 pieces stood at US$17, while that of natural rubber gloves’ average ASP stood at US$18 per 1,000 pieces during 2QFY2024.
Edited ByJason Ng & Surin Murugiah
Extended Mrec
Most Read Just In Maybank leads 89 Malaysian companies to make top 500 in Fortune SE Asia rankings Techbond Group shares up 30% to over three-year high Top Glove now a ‘buy’ as RHB IB sees losses narrowing, sentiment improving Anwar confirms has conveyed Malaysia’s wish to join BRICS economic group PublicInvest values Main Market-bound Johor Plantations Group at RM1
Level 3, Menara KLK, 1 Jalan PJU 7/6, Mutiara Damansara, 47810 Petaling Jaya, Selangor, Malaysia
On its part, Top Glove executive chairman Tan Sri Lim Wee Chai said the company is optimistic of returning to the black as early as August this year, citing further pickup in demand for gloves after two years of inventory destocking due to excess capacity built up during the pandemic.
If this is the result with such loss then considered TiGong no popi popi? Then how to Limit up like this?
The company will probably report a core loss of RM40 million to RM45 million for the third quarter ended May 31, 2024 (3QFY2024) versus RM66 million in 2QFY2024, according to RHB IB’s forecast. Top Glove is scheduled to release its results on June 19. Both volume and average selling price (ASP) are expected to recover, RHB IB noted.
Without disposal of land, top g actually loses only rm15m including forex gains. It’s a very huge difference from previous quarter. Expect big goreng later.
Yesterday RHB-OSK give Topglove a target price of RM1.32, based on their estimation below:-
"We expect TOPG to deliver a core loss of MYR40-45m from a core loss of MYR66m in 2QFY24.
Today, Top Glove delivery a superb result of RM58mil. Even if we exclude the one-off disposal profit, the net losses is still far far below than RHB-OSK expectation.
Shall RHB-OSK revised their target price to RM1.65 (25% upward), as Top Glove turnaround plan is beyond their expectation, and cash flow has improve substantially follow the disposal of excess land.
As usual, uncle Lim painted a very bright future for his company. This time is in 2026, another 1 & half year to go. If based on current ASP price trend prediction, expect another operating loss next quarter. Hope there are more excess land to sell in coming quarters to maintain in black.
For 3QFY2024, the Group registered Sales Revenue of RM637 million, an increase of 16% quarter on quarter. Its operational losses reduced to RM34 million in 3QFY2024 from a loss of RM59 million in 2QFY2024, representing a 42% improvement. Meanwhile, Sales Volume which had been growing since 4QFY2023 also continued its upward trend, rising 13% versus 2QFY2024, reflecting the Group’s steady recovery. The Group also achieved a Profit After Tax of RM62 million, up 255% compared with the preceding quarter. The Group’s enhanced performance was driven by increasing glove demand and ongoing initiatives focused on quality and cost optimisation measures, as well as gains from the disposal of excess land.
Raw material prices for 3QFY2024 were on an uptrend quarter on quarter, with the average natural latex concentrate price up by 20% to RM6.77/kg, while the average nitrile latex price rose 16% to USD0.89/kg.
WoW. Taikor Green QR. Alot better than expected. Operating loss reduced further with higher revenue. This is a better than expected result. Can Limit Up later?
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
yfchong
5,791 posts
Posted by yfchong > 1 week ago | Report Abuse
Just hit n run at 1.35 , I am happy liao after soo long