Fair Value: RM 4.12

Current Price: RM 5.12

Recommendation: HOLD/SELL

Yesterday's quarter earnings report shows that its earnings is still in a downtrend. I'm revising my Fair Value further down. If you need to cash out your investment in this particular stock in the short term (less than 1 year), I suggest that you SELL off all your holdings of this stock (even if you have to cut lost). I'm sorry for failing to give a SELL call in the month of June after Topglov annouced a lower quarter profit. I failed to see that the exterior factors (latex price uptrend, weakening US dollar & aggresive expansion by the rubber glove industry causing over supply) are actually fundamental changes affecting the company. The surge in price during that month due to the Bonus Issue announcement have clouded my judgement of the fundamental changes of this company, which call for a SELL.

However, for those of you who intent to invest in this stock for the long term (more than 3 years), I still stick to my earlier suggestion: Don't sell off all of your shares, just Hold half and Sell half. This is because we can't be sure where the bottom is. Don't average down or buy back now, even though the price have dropped substantially from your initial Sell price. I suggest that you begin to average down or buy back ONLY WHEN the company begin to show signs of uptrend in its earnings.

Note: For Supermax, my advice is the same as above - Sell off all if you're short term; Hold half and Sell half if you're long term.

Source: TheEdge Malaysia

KUALA LUMPUR: Top Glove Corp Bhd reported net profit of RM45.06 million in the fourth quarter ended Aug 31, 2010, down 20.6% from RM56.81 million a year ago.

It said on Wednesday, Oct 6 that revenue was 27.5% higher at RM541.38 million from RM424.51 million a year ago. Earnings per share were 7.3 sen versus 9.39 sen. It declared dividend of nine sen per share compared with 7.5 sen.

It said the earnings showed a decline despite higher sales due to normalised demand and oversupply of capacity situation.

“This was further aggravated with persistently high latex prices and weakening of US dollar, which affected the group’s revenue and profit margins. To date, latex price has increased by around 55% and US dollar has weakened against the ringgit by around 13% since beginning of the financial year 2010 (12 months ago),” it said.

For the financial year ended Aug 31, 201, net profit rose 45% to RM245.28 million from RM169.13 million. Revenue increased 35.9% to RM2.079 billion from RM1.529 billion.

Daniel Wong's Recommendation:
 
 Fair Value: RM 5.49

Current Price: RM 5.50

Recommendation: HOLD/SELL

There's a possibility that the earnings of Topglove will continue to drop in the next 3 to 6 months. Thus, the share price will continue to drop as well. But in the long term (more than 3 years), I expect the earnings to go back up for 2 reasons: 1) Demand on rubber gloves continue to grow every year, albeit at a normalised rate now; 2) I believe the over capacity problem is just temporary. As all the rubber glove manufacturers began to 'come to their senses' that they shouldn't expand too much and too fast, their plan for factories expansion will be deferred. So in times to come, I expect that the economics of supply-demand will be back in equilibrium. When that time comes, Topglove will be able to effectively increase the price of rubber gloves to cover the increasing latex cost. In fact, latex price does not always go up, as you can see here: http://spreadsheets.google.com/pub?key=pjJte0uaKGHGoQmtO_6VUMQ


However, there are 'signs' that the US Dollar will continue to be weaken against the Ringgit. For this reason, I personally would Sell at least half of my holdings in rubber glove shares to take advantage of the sharp drop in their market prices, if it is to happen. ;-)

Fair Value: RM 5.49

Current Price: RM 5.35

Recommendation: BUY

As the current market price is below my Fair Value, I'm upgrading my recommendation from Hold to Buy. Same as for my description for Supermax, I'm not sure if the market price will drop further from this price. So the best strategy would be to buy in stages.

Refer to previous write-up here for more info on this company.

Fair Value: RM 5.49

Current Price: RM 7.16

Recommendation: HOLD

On the 16th July (last Friday), the company exercised a 1:1 Bonus Issue. Thus, I revising the current Fair Value to RM 5.49 to reflect the capital changes.

Refer to previous write-up here for more info on this company

Fair Value: RM 10.98

Current Price: RM 12.92

Recommendation: HOLD

Recently, Top Glove annouced its 3rd Quarter report for the Financial Year 2010. Profit for 3Q10 has increased 54.37% compared to the 3Q09. However, the 3Q10's profit has decreased 9.52% compared to 2Q10. Therefore, I'm revising the Fair Value to RM10.98 from RM11.85 in anticipation of a downtrend in the next 3 quarters' earnings.

Refer to previous write-up here for more info on this company

Fair Value: RM 11.85

Current Price: RM 12.58

Recommendation: HOLD

Recently, Top Glove annouced its quarterly profit report. Its 2nd quarter profit almost doubled compared to previous year. Thus, I'm revising its Fair Value from RM9.97 to RM11.85. As the current market price has overshot this fair value, I'm giving it a Hold recommendation.

Refer to previous write-up here for more info on this company.

Published: Wednesday December 16, 2009 MYT 3:45:00 PM by http://biz.thestar.com.my/

Top Glove pre-tax profit up 100% in first quarter

KUALA LUMPUR: Top Glove Corporation Bhd has recorded a 100 per cent increase in pre-tax profit for its first quarter ended Nov 30, 2009, to RM86.6 million from RM43.3 million in same quarter last year.

Revenue of the world's largest rubber glove manufacturer rose 22 per cent to RM472.3 million from RM386.1 million previously.

Chairman Tan Sri Lim Wee-Chai attributed the continuing profit growth to aggressive marketing strategies and improvement in product productivity and quality.

"Top Glove is efficient and has adapted well to the chalenging business environment, resulting from cost-saving measures implemented at all factories," he said in a statement on Wednesday.

Lim said the group was continuing to strengthen its balance sheet and working capital position, currently in net cash position of RM222 million, with RM237.1 million cash in bank as at Nov 30, 2009.

"In view of the strong profit growth for the first quarter, the group is optimistic of its future outlook despite ongoing global economic challenges," he said.

"With a diversified range of good quality products offered to a huge customer base spread over more than 180 countries, the group is confident of continuous growth and good profitable performance in the current financial year," he added. - Bernama


Daniel's Recommendation:

Fair Value: RM 9.97

Current Price: RM 9.94

Recommendation: HOLD

I've raised the current Fair Value for this stock to RM 9.97 from RM 8.49 previously. As the current share price is very close to my Fair Value, I give it a Hold rating.

Refer to previous write-up here for more info on this company.

Fair Value: RM 8.49

Current Price: RM 9.00

Recommendation: HOLD

Refer to previous write-up here for more info on this company.

(8 years Historical Chart)

Company Background

The Top Glove group was established in Malaysia in 1991 and is principally involved in the manufacturing, trading, and exporting of latex examination, medical/surgical, clean room, nitrile, vinyl, polyethylene (PE), high risk and household gloves. True to its name, the group is the world's largest rubber glove manufacturer, supplying about  24% of the global market.

The group was listed in KLSE's Second Board in 2001 and a year later it was transferred to the Main Board. The group acquired 60.1% equity interest in Medi-Flex Ltd (a company listed on SGX-SESDAQ) in 2007. Currently, the group has 17 glove factories (13 in Malaysia, 2 in Thailand and 2 in China) with a production capacity of 31.5 billion pieces of gloves a year. The groups exports to 180 countries worlwide, including USA, Europe and the Far East (Japan, Hong Kong and Taiwan).

The group also has upstream production with 2 plants in Hadyai, manufacturing concentrated latex and block rubber products. These 2 latex concentrated plants are able to produce 90,000 tonnes of wet latex a year and is contributing about 80% of its in-house latex concentrate consumption.

The group recently reported a 55.5% y-o-y rise in earnings to RM168.1m, on the back of 11.2% rise in revenue for FY09. As there is increasing awareness of safety and hygiene among consumers coupled with Top Glove's aggresive capacity expansion, the group is expected to continue producing good earnings growth over the next few years. Also, rubber glove business is considered a recession proof business, particularly those of latex examination and medical/surgical gloves.

Fundamentals

ROE: 19.9%

Average EPS Growth Rate: 30.3%

D/E: 0.31

Gross Profit Margin: 16.52%

Average P/E: 15.2

Dividend Yield: 3%

Fair Value: RM 8.49

Current Price: RM 8.23

Recommendation: BUY