Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Top Glove Corp Bhd
(June 20, RM5.19)
Maintain buy at RM5.25 with target price RM5.95: Net profit was stable at RM25.6 million for 3QFY11 against 2QFY11. Earnings of RM87.1 million for 9MFY11 were 62% of our FY11E forecast of RM141 million and 60% of street's RM144 million. An interim dividend of 5 sen per share (single-tier) was declared.
For 3QFY11, revenue rose 10% quarter-on-quarter (q-o-q) mainly on a 10% rise in average selling price (ASP). Volume sales rose 1% q-o-q (improved from -5% to -6% q-o-q in 2QFY11) as buyers continued to adopt a wait-and-see attitude. Earnings before interest, tax depreciation and amortisation (Ebitda) grew a smaller 6% q-o-q as latex prices rose 6.8% q-o-q to an average of RM9.85 per kg (2QFY11: +28% q-o-q to RM9.22 per kg) and the ringgit +2% q-o-q against the US dollar (3.02 against 3.08 in 2QFY11).
Latex prices have eased 14% to RM9.35 per kg from an all-time high of RM10.84 per kg (Feb 22, 2011). Industry players see room for a further decline in rubber prices as supplies are improving post-winter season and on reduced rainfall. As ASP is gradually lowered, customer orders should pick up.
A gradual easing of, or even stable, rubber prices would allow for catch-up in cost pass-through (against 70% to 80% in 9MFY11) and aid margin recovery in FY12E. A strategy to rebalance the production mix towards higher-margin nitrile gloves (from 7% of production in 1QFY11 to 13% in 3QFY11 and a target of 16% by December 2011) would also have a positive impact on margins. A recent 7% hike in gas price will have a negligible impact, with Top Glove being able to fully pass on the higher cost with a small price increase of 0.6% or US$0.20 per 1,000 pieces.
We trim our net profit forecast by 13% to RM123 million for FY11E and 11% to RM217 million for FY12E after tweaking margin assumptions to reflect the slower-than-expected recovery. We are keeping our 'buy' rating as we believe earnings have bottomed out and the market has priced in poor results for FY11E. Rolling forward our base year to CY12E and applying a price-earnings ratio of 15.5 times (+0.5 standard deviation historical mean of 13.6 times), we maintain our target price of RM5.95. ' Citi Investment Research, June 17
This article appeared in The Edge Financial Daily, June 21, 2011.
Company Name: TOP GLOVE CORPORATION BHD
| Research House: CITI GROUP | Price Call: BUY | Target Price: 5.95 |
Top Glove Corp Bhd
(June 20, RM5.19)
Maintain buy at RM5.25 with target price RM5.95: Net profit was stable at RM25.6 million for 3QFY11 against 2QFY11. Earnings of RM87.1 million for 9MFY11 were 62% of our FY11E forecast of RM141 million and 60% of street's RM144 million. An interim dividend of 5 sen per share (single-tier) was declared.
For 3QFY11, revenue rose 10% quarter-on-quarter (q-o-q) mainly on a 10% rise in average selling price (ASP). Volume sales rose 1% q-o-q (improved from -5% to -6% q-o-q in 2QFY11) as buyers continued to adopt a wait-and-see attitude. Earnings before interest, tax depreciation and amortisation (Ebitda) grew a smaller 6% q-o-q as latex prices rose 6.8% q-o-q to an average of RM9.85 per kg (2QFY11: +28% q-o-q to RM9.22 per kg) and the ringgit +2% q-o-q against the US dollar (3.02 against 3.08 in 2QFY11).
Latex prices have eased 14% to RM9.35 per kg from an all-time high of RM10.84 per kg (Feb 22, 2011). Industry players see room for a further decline in rubber prices as supplies are improving post-winter season and on reduced rainfall. As ASP is gradually lowered, customer orders should pick up.
A gradual easing of, or even stable, rubber prices would allow for catch-up in cost pass-through (against 70% to 80% in 9MFY11) and aid margin recovery in FY12E. A strategy to rebalance the production mix towards higher-margin nitrile gloves (from 7% of production in 1QFY11 to 13% in 3QFY11 and a target of 16% by December 2011) would also have a positive impact on margins. A recent 7% hike in gas price will have a negligible impact, with Top Glove being able to fully pass on the higher cost with a small price increase of 0.6% or US$0.20 per 1,000 pieces.
We trim our net profit forecast by 13% to RM123 million for FY11E and 11% to RM217 million for FY12E after tweaking margin assumptions to reflect the slower-than-expected recovery. We are keeping our 'buy' rating as we believe earnings have bottomed out and the market has priced in poor results for FY11E. Rolling forward our base year to CY12E and applying a price-earnings ratio of 15.5 times (+0.5 standard deviation historical mean of 13.6 times), we maintain our target price of RM5.95. ' Citi Investment Research, June 17
This article appeared in The Edge Financial Daily, June 21, 2011.
Interesting to observe the increase in the use of gloves since 5 years. I believe awareness has increased in people to use gloves to avoid infectious diseases.
ReplyDeleteThis is excellent article about Gloves. Actually we need to set a trend to wear them while working in industries.
ReplyDeleteIt is my opinion you add a considerable amount of energy to build this particular article. I really thank you for get the job done.
ReplyDelete