High ASPs to sustain Top Glove’s earnings


TOP Glove Corp Bhd is expected to post record earnings in its upcoming quarterly results, supported by the sustained high average selling prices (ASPs) for rubber glove products.

MIDF Amanah Investment Bank Bhd (MIDF Research) analyst Ng Bei Shan said shortages in supply and booming demand for rubber glove products will support the higher ASPs in view that many countries are still battling to contain the spread of Covid-19.

“We expect another stellar quarter due to higher quarter-on-quarter (QoQ) ASPs. However, the high prices could be slightly offset by the temporary disruption in operation at Top Glove’s manufacturing plant due to the Covid-19 cases among its employees,” she told The Malaysian Reserve.

Ng projects Top Glove’s net profit for its current financial year 2021 (FY21) to surge nearly fivefold to RM8.46 billion from RM1.87 billion in FY20.

In early January, Top Glove announced a special dividend of 20% in addition to its existing dividend policy of a 50% dividend payout ratio for the remaining of its FY21.

Ng does not expect changes in Top Glove’s dividend policy.

Top Glove’s net profit swelled more than 21 times to RM2.4 billion in its first quarter ended Nov 30, 2020 (1Q21), from RM111.43 million recorded in the previous year.

Its revenue nearly rose fourfold to RM4.76 billion against RM1.21 billion on an annual comparison.

The group attributed the surge in its earnings to the higher sales, better utilisation levels that heightened its production efficiency and higher ASPs in line with the market pricing.

The world’s largest glovemaker said its ongoing technological advancements in automation and digitisation efforts, effective talent development and continuous innovation have also contributed to the massive earnings.

MIDF Research has maintained its ‘Buy’ recommendation on the glovemaker with a target price (TP) of RM8.29.

“Our TP is based on -0.5 standard deviation to its 10-year price-to-earnings ratio (PER) mean of 18.9

times pegged to unchanged FY22 forecast (FY22F) earnings per share of 43.8 sen.

“Our ‘Buy’ recommendation is premised on the positive outlook for Top Glove’s earnings and attractive valuation at a PER of five times FY21 estimate earnings and 12 times FY22F earnings,” Ng said in a recent research report.

She said Top Glove’s FY21 dividend yield projection is estimated at 13.2% and 4.2% for FY22. The glovemaker closed the trading week at RM5.25. It’s expected to release its latest quarterly results tomorrow.

Read our previous report here

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