March 17, 2011

TOPGLOV - Research houses mixed on Top Glove

Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: AMMB

Top Glove Corp Bhd has been upgraded to a "Hold" from "Fully Valued" by HwangDBS Vickers Research today, with expectations that margins and earnings would recover in the second-half of the
year.

"Restocking activities should pick up pace, following minimum orders in the last two quarters, and margin pressure would also ease as latex prices fall," it said in a research note today.

It raised the target price to RM5.30, from RM4.60 earlier, citing that a more balanced product mix would enable the company weather volatile material costs.

Meanwhile, AmResearch, in a separate research note, maintained its "Sell" stance on the company, following its weak earnings performance.

"We cut our financial year 2011 net profit forecast by 17 per cent to 20 per cent following both lower capacity utilisation rates and margin assumptions," it said.

Following the drop in rubber futures contract traded on the Tokyo Commodity Exchange after earthquake hit Japan, the research house was turning more optimistic of a meaningful correction in latex prices.

"We expect benefits of a more favourable cost structure to impact after some time lag, possibly post two to three months," it said.

It also lowered its fair value to RM4.30, from RM4.70 previously, after a downward earnings revision of the group. -- Bernama

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