You are on page 1of 3

BIMB SECURITIES RESEARCH

MARKET INSIGHT
PP16795/03/2013(031743)

Friday, 15 June, 2012

Results Review

Top Glove Corporation


Above Another Strong Quarter
TOPG MK 2,883.0 Equity 618.7 5.88 3.85 480,252 57.8% Y n.a. Altman Z-score YTD price chg YTD KLCI chg Beta Major Shareholders Tan Sri Lim Wee Chai KWAP 9.0 -6.8% 2.6% 1.0 28.9% 6.7% Stock Data Bloomberg Ticker Market Cap Issued shares 52-week range (H) 52-week range (L) 3-mth avg daily volume Free Float Shariah Compliant Financial Derivatives Share Performance (%) Absolute vs. KLCI Financial Highlights FYE 31 Aug 2009 Turnover 1,529.1 (RMm) EBIT 224.5 Pretax profit 222.0 Net Profit 169.1 CY Net Profit 194.5 EPS (sen) 27.4 CY EPS (sen) 31.5 PER (x) 17.0 DPS (sen) 11.1 Div. Yield (%) 2.4% NTA/share (RM) 1.30 EBIT margin Pretax margin Effective tax rate ROE ROA Net Gearing (x) Growth ratios Turnover EBIT Pretax profit Share Price Chart
6.00 5.50 5.00 4.50 4.00 3.50 Jun-11

Buy
Price: RM4.66 Target Price: (+24.4% upside) RM5.80
Top Gloves 9MFY12 net earnings of RM138.7m is 8.3% above our forecast and 13% higher than street estimates, making up 81% of our full year figure. QoQ and YoY earnings have shown improvements due to higher demand and decrease in latex prices in recent months. We have revised our FY12 and FY13 earnings upwards and rolled our valuation to CY13 thus raising our target price by 2.5% to RM5.80. Maintain BUY. Huge earnings jump. YTD revenue and net earnings improved by 12.9% and 59.3% respectively. The improved earnings can be attributed to (i) increase in demand and (ii) downtrend in latex prices which had declined from an average of RM9.25/kg in 9MFY11 to RM7.50/kg in 9MFY12. Overall margins improvement. 9M EBIT margin has expanded from 6.6% to 10.2% due to the abovementioned reason. Nonetheless, QoQ EBIT margin has declined from 12.5% to 10.6% due to change in product mix. Stabilised latex price. Latex price has been trending below RM8/kg in the past 3 months without much fluctuation. Despite the Thai Governments intervention to support rubber price earlier this year; it has dropped to mid RM6.57/kg yesterday. Furthermore, the weakening MYR against the USD would be welcome news for glove makers as well. Earlier in the year, most rubber glove buyers have been keeping their inventory low (2 months compared to their usual inventory level of about 4 months). We expect buyers to increase their inventory level back to their normal level as gloves are getting cheaper on the back of lower latex prices. Interim dividend. Top Glove had proposed a single tier interim dividend of 7 sen per share. We expect the company to pay dividend totalling to 16sen for FY12 translating into a net yield of 3.4%. Upgrading our forecast. With the strong 9MFY12 earnings, we have tweaked our FY12 and FY13 net earnings higher by 7.8% and 2% to RM184.1m and RM187m respectively. Meanwhile, the companys financial position has improved with net cash per share of 55sen compared to previous quarters 48sen. Attractive valuation. At current price, Top Glove is trading at a forward PER of 15.6x and 15.4x for FY12 and FY13 respectively, compared to its usual 19x to 22x. We rolled over our valuation to CY13 and pegged a higher target price of RM5.80 based on an average 5-year PER band of 19x over CY13 EPS of 29.9sen. Top Glove remains our favourite within the rubber glove sector and we maintain our BUY recommendation.

1mth 7.6 (12.2)

3mth (5.3) (4.8)

12mth (9.5) (12.2)

2010 2,079.4 291.9 305.0 245.2 201.2 39.7 32.5 11.7 16.0 3.4% 1.73

2011 2,053.9 126.1 145.4 113.1 136.8 18.3 22.1 25.5 11.0 2.4% 1.78

2012E 2,319.9 221.2 234.3 184.1 185.1 29.8 29.9 15.6 16.0 3.4% 1.92

2013E 2,467.0 224.0 238.0 187.0 188.6 30.2 30.5 15.4 17.0 3.6% 2.05 9.1% 9.6% 20.0% 15.0% 12.1% net cash

14.7% 14.0% 6.1% 9.5% 14.5% 14.7% 7.1% 10.1% 24.3% 17.9% 20.8% 20.0% 22.7% 25.6% 10.2% 15.8% 15.1% 19.6% 8.2% 12.7% net cash net cash net cash net cash

11.3% 64.1% 62.5%

36.0% 30.0% 37.4%

-1.2% -56.8% -52.3%

12.9% 75.5% 61.2%

6.3% 1.2% 1.6%

Aug-11

Oct-11

Dec-11

Feb-12

Apr-12

Jun-12

Thong Pak Leng pakleng.thong@bimbsec.com.my 03-26918887 ext 186

|1

15 June 2012

Results Review: Top Glove Corporation 3QFY12

Quarterly figures
FYE 31 Aug (RMm) Revenue EBIT Pretax profit Taxation Minority Interest Net Profit EPS (sen) Net gearing (x) EBIT margin (%) PBT margin (%) Net profit margin (%) Effective tax rate (%) 3QFY11 535.3 31.3 34.5 (8.5) (0.4) 25.6 10.4 net cash 5.8% 6.4% 4.8% -24.5% 4QFY11 541.8 26.0 35.0 (8.1) (0.8) 26.1 7.3 net cash 4.8% 6.5% 4.8% -23.2% 1QFY12 554.8 37.6 41.6 (9.1) (1.0) 31.4 5.8 net cash 6.8% 7.5% 5.7% -22.0% 2QFY12 549.0 72.8 68.8 (14.6) (0.7) 53.5 4.1 net cash 13.3% 12.5% 9.7% -21.2% 3QFY12 603.3 63.6 63.7 (8.8) (1.0) 53.8 4.1 net cash 10.6% 10.6% 8.9% -13.9% QoQ Chg 9.9% -12.5% -7.4% -39.5% 39.8% 0.7% 0.7% n.a. -20.4% -15.8% -8.4% -34.6% YoYChg 12.7% 103.6% 84.6% 4.4% 133.3% 110.2% -60.3% n.a. 80.6% 63.8% 86.5% -43.4% 9MFY11 1,512.1 100.1 110.4 (22.1) (1.3) 87.1 32.4 net cash 6.6% 7.3% 5.8% -20.0% 9MFY12 1,707.1 174.0 174.1 (32.6) (2.8) 138.7 14.1 net cash 10.2% 10.2% 8.1% -18.7% YTD Chg 12.9% 73.8% 57.7% 47.6% 122.8% 59.3% -56.5% n.a. 53.9% 39.7% 41.1% -6.4%

Source: BIMB Securities

Income Statement
FYE 31 Aug (RMm) Revenue EBITDA Pretax profit Tax MI Net profit CY Net profit EPS (sen) EPS growth (%) CY EPS (sen) DPS (sen) NTA/ share (RM) Net gearing (x) PER (x) Div. yield (%) P/ NTA (x) EV/ EBITDA (x) ROE (%) 2009 1,529.1 281.3 222.0 (53.9) 1.1 169.1 194.5 27.4 56.5% 31.5 11.1 1.3 net cash 17.0 2.4% 3.6 9.7 22.7% 2010 2,079.4 350.7 305.0 (54.6) (5.2) 245.2 201.2 39.7 45.0% 32.5 16.0 1.7 net cash 11.7 3.4% 2.7 7.5 25.6% 2011 2,053.9 187.4 145.4 (30.2) (2.0) 113.1 136.8 18.3 -53.9% 22.1 11.0 1.8 net cash 25.5 2.4% 2.6 14.7 10.2% 2012E 2013E 2,319.9 2,467.0 290.3 296.9 234.3 238.0 (46.9) (47.6) (3.3) (3.4) 184.1 187.0 185.1 188.6 29.8 30.2 62.8% 1.6% 29.9 30.5 16.0 17.0 1.9 2.1 net cash net cash 15.6 15.4 3.4% 3.6% 2.4 2.3 9.3 8.8 15.8% 15.0% Source: BIMB Securities

Balance Sheet
FYE 31 Aug (RMm) Non Current Assets Current Assets Total Assets Current Liabilities Non Current Liabilities Shareholders' Fund Minority Interests Equity & Liabilities 2009 620.9 511.5 1,132.4 244.1 42.4 824.5 21.5 1,132.4 2010 627.9 744.1 1,372.0 218.3 37.4 1,092.5 23.9 1,372.0 2011 707.6 689.5 1,397.1 203.5 46.5 1,122.6 24.6 1,397.1 2012E 698.6 802.7 1,501.3 222.5 46.5 1,207.8 24.6 1,501.3 2013E 685.7 916.3 1,602.0 241.1 46.5 1,289.8 24.6 1,602.0

Source: BIMB Securities

www.bimbsec.com.my

|2

15 June 2012
DEFINITION OF RATINGS BIMB Securities uses the following rating system:

Results Review: Top Glove Corporation 3QFY12

STOCK RECOMMENDATION BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months. TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain. NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels. TRADING SELL Share price may fall by more than 15% in the next 3 months. SELL Share price may fall by more than 10% over the next 12 months. NOT RATED Stock is not within regular research coverage. SECTOR RECOMMENDATION OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market index over the next 12 months NEUTRAL The Industry as defined by the analysts coverage universe, is expected to perform in line with the relevant primary market index over the next 12 months UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market index over the next 12 months Applicability of ratings The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the coverage do not carry investment ratings as we do not actively follow developments in these companies. Disclaimer The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB Securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X) A Participating Organisation of Bursa Malaysia Securities Berhad Level 32, Menara Multi Purpose, Capital Square, No. 8 Jalan Munshi Abdullah, 50100 Kuala Lumpur Tel: 03-2691 8887, Fax: 03-2691 1262 http://www.bimbsec.com.my

Kenny Yee Head of Research

www.bimbsec.com.my

|3

You might also like