WITH Top Glove Corp Bhd’s share price having languished near its 52-week low with little respite in sight – and with many stock market analysts already downgraded its stock to “sell” – a venture capitalist-backed research house has come forward to dispel the notion that the future will remain bleak forever for the world’s largest glove maker.
With its stock price now at the 2015 level, Valuevest Ventures Sdn Bhd reckoned that the glove maker can expect to bottom out soon by rebounding with a good long-term outlook.
“More importantly, founder and chairman Tan Sri Lim Wee Chai remains firm in raising his shareholding ratio, expressing his confidence in the group’s future prospects,” the research house pointed out in a company update.
“Although the group’s current share price has dropped to the rock bottom, we initiated Top Glove with a ‘buy’ recommendation and a target price of RM1.58, a 92% upside potential (from its current share price).”
The RM1.58 target price was derived from Top Glove’s average share price in CY2019 before the COVID-19 pandemic outbreak.
According to Valuevest Ventures, Top Glove’s recent share price performance has shown a downtrend after the pandemic outbreak as the demand for gloves has decreased.
But the research house expects Top Glove to return to its former glory by ensuring good ROI (return on investment) for investors.
“In the long term, we believe that Top Glove will shine again as it has paid out a total dividend of RM7.84 bil since 2001 which means the company is serious and dedicated to sharing its profits with shareholders.”
The research house also supported the measures initiated by Top Glove to defer its glove output capacity expansion by taking vertical and horizontal integration initiatives which include ownership of a gamma sterilisation facilities, nitrile rubber (NBR) latex factories and original glove factories which will greatly improve cost savings, facilitate better planning and overcome bottlenecks.
“Although the overall group revenue has shown a downward spiral from RM16.36 bil to RM4.5 bil in its 9M FY8/2022, its average revenue and profit after tax (PAT) margin were almost similar as before the pandemic outbreak and therefore serves as a good sign as the group was able to maintain its PAT margin.”
At today’s mid-day trading break, Top Glove was down 1 sen or 1.26% to 78.5 sen with 7.69 million shares traded, thus valuing the glove maker at RM6.44 bil. – Sept 9, 2022
