Top Glove - Maybank Kim Eng 2020-09-14: Many Rabbits In The Hat

TOP GLOVE CORPORATION BHD (SGX:BVA) | SGinvestors.io TOP GLOVE CORPORATION BHD (SGX:BVA)

Top Glove - Many Rabbits In The Hat


Raising Top Glove's earnings forecasts; our top pick

  • For Nov 2020, Top Glove (SGX:BVA)’s nitrile glove ASP would be 4.1x that of Feb 2020’s level and we understand that there is still another 30-50% upside. Additionally, the ASP hike for latex powder free gloves has reaccelerated for Nov 2020 and there is still room to raise the ASP further.
  • We raise FY20/21/22E EPS by 6%/63%/224% on higher ASPs, but retain our Target Price at MYR9.53 (ex-bonus) on a lower CY21E P/E target of 9x, about -1SD of 5Y mean (vs. 16x), on consideration for earnings to taper post CY21E.
  • Maintain BUY.



Nitrile gloves: Going for the highest possible ASP

  • For Nov 2020, we understand the ASP hike for nitrile gloves is +15% m-o-m, bringing ASP of nitrile gloves to 4.1x that of Feb 2020 (pre-COVID 19). We note that Sri Trang Agro-Industry (SGX:NC2)’s nitrile ASP is on par to that of Top Glove. As for Hartalega and Kossan, their ASPs are 3-6 months behind but both are expected to raise ASPs to narrow the gap.
  • Presently, Top Glove’s spot selling price is USD130-150/k pieces (+37-58% higher than the normal orders) and it may raise its ASP to this level in the near-term.
  • We also note that some of its customers are willing to lock in their next 12 months orders at Nov’s high ASP level, signalling that even customers are expecting the ASP to stay elevated in the next 12 months.


Latex powder free gloves: ASP hike reaccelerating

  • ASP hike for latex powder free gloves has reaccelerated for Nov to +10% m-o-m (Oct: +5% m-o-m) due to the strong demand. Some customers have shifted their orders to latex powder free gloves as the sales lead time of c.15 months is shorter than nitrile glove’s c.19 months.
  • We note that Sri Trang Agro-Industry’s latex powder free glove ASP is c.15% higher than that of Top Glove. Hence, there is still room for Top Glove to raise its ASP further.

Special dividend in FY21E?






Lee Yen Ling Maybank Kim Eng Research | https://www.maybank-ke.com.sg/ 2020-09-14
SGX Stock Analyst Report BUY MAINTAIN BUY 9.53 SAME 9.53



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