Stock Name: TOPGLOV
Company Name: TOP GLOVE CORPORATION BHD
Rubber glove manufacturer, Top Glove Corp Bhd, may have to brace for more difficult times if the latex price continues to climb, says OSK Research Sdn Bhd.
In a research note today, OSK said Top Glove would likely face a tough time as the group would encounter a higher cost base and limited ability to pass on the cost increase to its customers, due to glove oversupply.
Top Glove's pre-tax profit for the financial year ended Aug 31, 2011 slipped to RM145.39 million from RM304.96 million last year, while revenue fell to RM2.05 billion.
Going into the remainder of this year and first half of 2012, OSK said it expected latex price to inch up again due to the severe floods in Thailand and the expected wintering season in first half of 2012.
"The concerns for Top Glove are the factors beyond its control, namely latex price and that the price movement influenced by speculation and not purely driven by demand and supply factors," it said.
HwangDBS Vickers Research said the adverse weather in Thailand would affect tapping as about 70 per cent of Top Glove's latex supply came from southern Thailand (although southern province was spared by floods so far).
"We retain our 'hold' rating because volatile latex prices will continue to be a dampener on an efficient cost pass-through mechanism," it said in a research note.
Meanwhile, ECMLibra Investment Research said it would maintain its 'hold' call for the group despite further weakness in share price, as there were no re-rating catalysts in the near term.
"Margin recovery is expected to be further delayed by continued oversupply in the industry and renewed concern of high latex price due to flood in Thailand," it said in a research note.
OSK said it expected financial year 2012 to continue to be challenging for Top Glove. -- Bernama
Company Name: TOP GLOVE CORPORATION BHD
| Research House: OSK | Price Call: SELL | Target Price: 4.00 |
Rubber glove manufacturer, Top Glove Corp Bhd, may have to brace for more difficult times if the latex price continues to climb, says OSK Research Sdn Bhd.
In a research note today, OSK said Top Glove would likely face a tough time as the group would encounter a higher cost base and limited ability to pass on the cost increase to its customers, due to glove oversupply.
Top Glove's pre-tax profit for the financial year ended Aug 31, 2011 slipped to RM145.39 million from RM304.96 million last year, while revenue fell to RM2.05 billion.
Going into the remainder of this year and first half of 2012, OSK said it expected latex price to inch up again due to the severe floods in Thailand and the expected wintering season in first half of 2012.
"The concerns for Top Glove are the factors beyond its control, namely latex price and that the price movement influenced by speculation and not purely driven by demand and supply factors," it said.
HwangDBS Vickers Research said the adverse weather in Thailand would affect tapping as about 70 per cent of Top Glove's latex supply came from southern Thailand (although southern province was spared by floods so far).
"We retain our 'hold' rating because volatile latex prices will continue to be a dampener on an efficient cost pass-through mechanism," it said in a research note.
Meanwhile, ECMLibra Investment Research said it would maintain its 'hold' call for the group despite further weakness in share price, as there were no re-rating catalysts in the near term.
"Margin recovery is expected to be further delayed by continued oversupply in the industry and renewed concern of high latex price due to flood in Thailand," it said in a research note.
OSK said it expected financial year 2012 to continue to be challenging for Top Glove. -- Bernama
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