Top Glove, Analyst on the Outlook of Malaysian Glove Stocks

SINGAPORE – The recent plunge in share prices of Malaysian rubber gloves makers is “unreasonable,” analysts said, predicting further upside in stocks.

Shares of Top Glove, the world’s largest rubber gloves manufacturer, closed down 17.7% this year after closing on Monday. Its smaller allies Hartalega, Supermax and Coson have fallen between 18% and 30%.

In comparison, the benchmark FTSE Bursa Malaysia KLCI index fell 0.9% over the same period.

Staff at Top Glove, the world’s largest glove manufacturer, will inspect the production of latex gloves on February 18, 2020 in a watertight test room at the company’s factory in Selangor, Malaysia.

Samsul said | Bloomberg | Getty Images

“We continue to lose weight in this area, as we believe the recent decline in share prices is unfair,” NG Chi Hong, an analyst at Malaysian investment bank Efin Hwang, wrote in a report on Monday.

The decline in Malaysia’s glove stocks came after a significant surge last year when the Kovid-19 epidemic boosted demand for medical gloves.

Factors hurting investor confidence in stocks include the possible reduction in the price of gloves sold at low demand as more people are being vaccinated globally.

In addition, Top Glove’s plans to list its third stock list in Hong Kong after Malaysia and Singapore have also raised concerns that the company is raising funds in anticipation of a weaker outlook.

But those concerns will potentially ease, the NGA said. Its target prices in Malaysia’s Glove stocks are here.

Effin Hwang’s target prices for Malaysian glove stocks

Stocks Closer to Monday (Malaysian Ringgit) Target Price (Malaysian Ringgit) Above
Top glove 5.04 10.10 100%
Hartalega 9.70 17.00 75%
Supermax 4.21 10.90 159%
Coson 3.66 9.30 154%

Demand for above average

The analyst said that the increase in the average selling price of socks is not sustainable and is projected to fall by 30 to 35% in 2022. However, prices will remain above pre-epidemic levels for at least the next two to three years. He said.

That is partly because the demand for waves is expected to increase in the coming years as the medical field uses more personal protective devices, N.G.

He added that he agreed with the report by consultancy Frost and Sullivan and was commissioned by Top Glove, which demanded an annual average growth of 15% of disposable gloves for the next five years.

NGNG ​​said such an increase in demand would come with a 20% annual increase in supply over the next few years.

Top Glove plans to be listed in Hong Kong

Another development that has accelerated the recent price action in Malaysia’s glove stocks is the third list of top gloves held in Hong Kong.

The company said last month that it had applied for “dual primary listing” in Hong Kong, which could increase to 7.7 billion ringgit (.8 1.8787 billion). He said he would keep his existing primary list in Malaysia and a secondary list in Singapore.

Investors reacted negatively to the news on concerns that the additional listing would earn the stock’s top glove per share.

Nevertheless, the NGA has maintained its “buy” rating for Top Glove and its Malaysian peers. He said the fall in share prices has pushed valuations to a level that is “too cheap to ignore.”

The analyst added that compared to their international counterparts, Malaysian glove producers are offering better returns on dividend dividend yield and equity – a measure of financial performance.

On Tuesday, Top Glove posted quarterly profits of 3.8787 billion ringgit (5 555 million) for the three months ended February, up from million ringgit (૨ 8.0.03 million) a year earlier.

The company said global demand for gloves has remained “strong,” while the Kovid epidemic increased consumption of gloves and raised hygiene awareness.