Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Research House: CIMB
KUALA LUMPUR: CIMB Equities Research has reduced its FY11-13 net profit numbers for Top Glove Corp Bhd by 4%- 27%, having overestimated the glove maker's cost pass-through ability and it had been too optimistic about the recovery of glove demand.
'We also cut our FY11-12 capacity assumptions by 3-7% to reflect management's latest expansion plans. The adjustments of our cost and capacity assumptions lead to a fall in our target price from RM5.98 to RM5.57. We continue to value the stock at our target market P/E of 14.5 times,' it said on Monday, May 16.
CIMB Research said despite the lower target price, it reiterated its NEUTRAL rating as Top Glove's share price has fallen 3% since its last update.
The research house said it does not deny that within the sector, Top Glove is most leveraged to lower rubber prices. 'But its 1-year forward P/E of 19.3x is two standard deviations above its 6-month average,' it said.
CIMB Research said since March 2009, Top Glove's share price has rarely traded at such a premium for long and we expect its valuation multiple to revert to the mean in the quarters ahead.
'Also, our revised FY11 forecasts are 31% below consensus. We believe that over the next few weeks, there could be profit downgrades by the market as Top Glove's 3Q reporting period comes to a close at the end of May,' it said.
Company Name: TOP GLOVE CORPORATION BHD
Research House: CIMB
KUALA LUMPUR: CIMB Equities Research has reduced its FY11-13 net profit numbers for Top Glove Corp Bhd by 4%- 27%, having overestimated the glove maker's cost pass-through ability and it had been too optimistic about the recovery of glove demand.
'We also cut our FY11-12 capacity assumptions by 3-7% to reflect management's latest expansion plans. The adjustments of our cost and capacity assumptions lead to a fall in our target price from RM5.98 to RM5.57. We continue to value the stock at our target market P/E of 14.5 times,' it said on Monday, May 16.
CIMB Research said despite the lower target price, it reiterated its NEUTRAL rating as Top Glove's share price has fallen 3% since its last update.
The research house said it does not deny that within the sector, Top Glove is most leveraged to lower rubber prices. 'But its 1-year forward P/E of 19.3x is two standard deviations above its 6-month average,' it said.
CIMB Research said since March 2009, Top Glove's share price has rarely traded at such a premium for long and we expect its valuation multiple to revert to the mean in the quarters ahead.
'Also, our revised FY11 forecasts are 31% below consensus. We believe that over the next few weeks, there could be profit downgrades by the market as Top Glove's 3Q reporting period comes to a close at the end of May,' it said.
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