AS it inches closer to its pre-pandemic level, Top Glove Corp Bhd’s decision to shelve its listing could perhaps add a strain on its share price.
However, the long-term impact is positive as the measure removes uncertainties surrounding the initial public offering (IPO) which would have diluted its long-term earnings per share (EPS) by around 10%, according to AmResearch.
“We believe that the news is short-term negative on the stock,” analyst Alan Lim Seong Chun pointed out in a company update. “We have reduced our share base assumption due to the Hong Kong IPO postponement.”
A Reuters report yesterday (March 8) stated that the world’s largest glove maker has postponed its plan to raise US$347 mil in a Hong Kong listing due to elevated market uncertainty following Russia’s invasion of Ukraine.
Top Glove managing director Datuk Lee Kim Meow was quoted as saying: “Due to the changing developments in the industry and the current equity market conditions, we have decided to give ourselves more time to pursue this exercise in Hong Kong.”
Lee also said that the company was in no hurry to list as the plan was for the long-term benefit.
“We have cut our FY2022/2023/2024 earnings estimates by 19%/12%/8% to RM532 mil/RM786 mil/RM968 mil after assuming higher raw material cost,” justified AmResearch.
“The spike in crude oil prices would push up nitrile butadiene’s cost which is the raw material used to make nitrile gloves. Due to the stiff competition in the gloves industry, we believe that Top Glove may not be able to completely pass on the cost increase to customers.”
Top Glove is expected to release its 2Q FY8/2022 earnings later today. “Due to the ongoing trend of lower ASP for gloves, we expect its 2Q FY8/2022 earnings to be weaker quarter-on-quarter. However, its balance sheet should remain strong with a net cash position,” added AmResearch.
At 11.44am, Top Glove was down 7 sen or 3.74% to RM1.80 with 5.46 million shares traded, thus valuing the company at RM14.77 bil. – March 9, 2022
