Top Glove’s 4Q results to provide market leads

Investors will be looking for a potential spike in dividend on the back of strong financial results and recently completed bonus issue


INVESTORS are expected to eye Top Glove Corp Bhd, as the world’s largest rubber glovemaker is expected to announce its fourth-quarter (4Q) and full-year financial year 2020 (FY20) results later today.

The company’s results could set the benchmark for its industry peers, and investors will be looking for a potential spike in dividend on the back of strong financial results and recently completed bonus issue.

Top Glove’s share price which closed 1.75% or 15 sen lower to RM8.43 on Tuesday could see volatility again, having recovered from a low of RM6.45 last Thursday.

Malacca Securities Sdn Bhd head of research Loui Low expects a volatile market ahead of Top Glove’s announcement as market participants could start to take profit.

“We believe profit-taking activities could be marginal as glove average selling prices (ASPs) are still near highs, which may translate to better profits in the next few quarters,” he told The Malaysian Reserve on Tuesday.

MIDF Amanah Investment Bank Bhd strategy head Kifni Kamaruddin concurred with Low’s view, while Bank Islam Malaysia Bhd economist Adam Mohamed Rahim opined that Top Glove’s results have been largely priced in by investors.

“Expect Top Glove’s share to remain volatile as much optimism has been built into its share price, reflected in the rather rich forward valuation. Any earnings disappointment could trigger renewed selling,” Kifini said.

Maybank Investment Bank Bhd (Maybank IB) in a note on Monday raised Top Glove’s FY20, FY21 and FY22E earnings per share (EPS) estimates by 6%, 63% and 224% respectively, on higher ASPs.

Maybank IB retained its target price of RM9.53 and ‘Buy’ call on Top Glove after projecting a net profit of RM1.05 billion for the 4Q ending Aug 31, 2020 (FY20).

The investment bank stated that this figure was based on its blended ASPs estimate of US$37 (RM153) per thousand pieces, sales volume estimate of 19.1 billion pieces, and operating cost increase forecast of 28% quarter-on-quarter.

Top Glove made a net profit of RM348 million in 3Q and RM80 million in 4Q19. Top Glove FY20E net profit is estimated at RM1.63 billion by Maybank IB.

Top Glove is now ranked second in terms of market capitalisation at RM68.61 billion.

The upcoming Sabah state elections on Sept 26 could also “shake things up” next for the local bourse.

Among Sabah-based stocks that could attract investors’ interest include Suria Capital Holdings Bhd, Bahvest Resources Bhd, Coastal Contracts Bhd, Cymao Holdings Bhd, Focus Lumber Bhd, Innoprise Plantations Bhd, Kretam Holdings Bhd, Kwantas Corp Bhd, NPC Resources Bhd, Timberwell Bhd and WMG Holdings Bhd.

“Investors favour political certainty. A highlight would be Suria Capital which operates a stable of ports in Sabah,” Adam said.

He noted that investors continue to anticipate the results of Malaysia’s inclusion or exclusion from the FTSE Russell World Government Bond Index due on Sept 24.

Low believed that the state election could set a direction for Perikatan Nasional’s administration and hence, if there are any drastic outcomes on the election, it will bring volatility to the market.

Kifni, however, does not expect the coming Sabah election to wield material influence over the direction of the overall market.

External cues particularly from Wall Street may dictate the short-term direction of the local bourse he added.

“Technically speaking, an important support level to observe is the 1,475-point level which is the neckline of a double-top formation. If the neckline were breached, it may precipitate more technical selling among market traders,” Kifni said.

Low observed that the local stock market is still in the sideways rangebound trade with a slightly positive bias as prices of glove counters are recovering at this moment.

“Market is looking for some catalysts or themes emerging from the immigration contract, large scale solar contract 4 and anticipation of mega infra projects contracts to be dished out in 3Q20-4Q20.

“With the Overnight Policy Rate left unchanged, more certainty has emerged that market players will put their money into high dividend-yielding stocks such as real estate investment trusts (REITs) and hence, REITs have been moving marginally higher over the past week,” he said.