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PETALING JAYA: Hartalega Holdings Bhd
and Top Glove Corp Bhd, the world’s two largest glove manufacturers, will hold separate events this week that will provide investors with direct information on the companies’ business prospects.
With a combined market capitalization of over RM100bil, the two companies have a strong influence on market sentiment.
Since the outbreak of the Covid-19 pandemic, its share price has generated profits in Bursa Malaysia.
This was due to strong quarterly earnings growth, driven by strong demand and higher selling prices as the world scrambled to stock up on vital protective equipment for its leaders.
Glove manufacturers’ order visibility is strong, CGS-CIMB Research said in a note on Friday, while average selling prices (ASP) are expected to remain high for at least another year.
But despite this bullish outlook, pressure for glove makers to justify their elevated valuations is mounting.
Eager investors are closely following the development of the Covid-19 vaccine, while investment in new glove manufacturing capabilities is likely to curb future price hikes.
These concerns contributed to the recent pullback in glove manufacturers’ share prices from their recent spikes in early August.
An equity research firm last week even cut its price target for Top Glove in half, prompting a new round of sale that quickly spread to other glove counters.
Top Glove came out strong to defend itself, spending over RM200k in the past three days to buy back its own shares.
For Shahril Othman, a 40-year-old creative manager who opened his first stock trading account in July, the wild turn in the stock market is quite overwhelming as a novice investor.
“I think glove manufacturers will continue to do well this year, given the current pandemic situation,” he said.
Local retail investors were a major force in propelling FBM KLCI from its March low as the index outperformed many of its regional peers, thanks to the meteoric rise of glove manufacturers.
Retail investor participation has hit a record this year, filling the gap as foreign funds withdrew.
“A lot of people have made a lot of money from glove stocks, but some are eager for their investment, especially after the recent crash,” Shahril said.
Tomorrow, Hartalega will celebrate its first virtual AGM.
The company is expected to take this opportunity to update shareholders on its business prospects in the current financial year.
Hartalega’s shares, which closed at a record CU20.50 on August 3, last traded at CU12.44 on Friday.
That’s almost a 40% drop in just one month.
Investors will seek some kind of reassurance from management before rekindling their love affair with glove stocks.
Hartalega, in August, reported a 134% increase in net income to RM220 thousand, or 6.5 sen of participation in the first quarter ended June 30.
Consensus analysts’ estimate has put its full-year earnings at RM1.75 billion, or 53 sen per share, largely due to expectations that earnings will increase substantially in the coming quarters due to strong demand. and the increase in product prices.
Meanwhile, Top Glove is scheduled to release its fourth quarter results that ended August 31 on Thursday.
Expectations for Top Glove are high, especially after its chief executive, Tan Sri Lim Wee Chai, said in a statement on Friday that the company was confident of strong growth.
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