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Top Glove Stock Drop by 7.59% In Few Hours Despite Record RM1.29 Billion Quarterly Net Profit

Selling pressure mounted on Top Glove Corp Bhd’s shares in the afternoon session, even after the glove manufacturer announced its record-high quarterly net profit of RM1.29 billion for the fourth financial quarter ended Aug 31, 2020 (4QFY20).

Top Glove’s share price dropped below RM8 as at 4.35pm to RM7.95 with 183.9 million shares changing hands. This is a nearly 10% drop from its intraday high of RM8.82.

The fall in Top Glove, the second largest FBM KLCI component stock in terms of market capitalisation, has dragged down the benchmark index. The FBM KLCI index declined 18.7 points or 1.22% to 1,512.56 points.

At noon market break, the rubber glove giant announced that it posted its largest quarterly net profit on record today.

Quarterly profit of RM1.29 billion recorded for 4QFY20 is nearly 18 times higher compared with RM74.17 million posted in the corresponding quarter last year. Its quarterly revenue skyrocketed by 161% to RM3.11 billion, from RM1.19 billion in 4QFY19.

It is declaring a final dividend of 8.5 sen, bringing FY20 total dividend payout to 11.8 sen per share, representing a net profit payout ratio of 51% of annual profit.

Earnings per share (EPS) for 4QFY20 came in at 15.95 sen versus 0.97 sen a year ago, resulting in cumulative annual EPS of 23.31 sen for FY20 compared with 4.76 sen for FY19.

The strong fourth quarter performance lifted Top Glove’s annual net profit to RM1.87 billion — the highest ever achieved by the world’s largest glove manufacturer. This is a 412% jump from RM364.68 million in FY19. Annual revenue leaped 50.7% year-on-year to RM7.24 billion, from RM4.8 billion.

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Top Glove attributed the stellar set of earnings to the surge in demand for rubber gloves following the Covid-19 pandemic, as well as productivity enhancements that made it more efficient and reach superior economies of scale.

The group’s executive chairman Tan Sri Lim Wee Chai last Friday already hinted that Top Glove will deliver stellar financial results for the financial year ended Aug 31, 2020 (FY20) and FY21.

“Our prospects and the glove industry remain promising. Global demand for gloves is growing steadily at 10% to 12% per annum driven by strong market fundamentals,” Lim said in a note posted on the company’s official website last week. The comment was seen as a message to stem the recent sharp fall in Top Glove’s share price.

“Top Glove expects further ASP increases for nitrile gloves at 20% m-o-m (month-on-month) in September and October, and potentially another 10% m-o-m in November 2020.

“Besides, Top Glove also sees ASPs for latex gloves increasing 5% m-o-m in September and October. This is also supported by [them] recently receiving more spot orders until end of 2020 as it expects to allocate up to 30% of its total capacity for spot orders going forward,” CGS-CIMB said.

Malacca Securities Sdn Bhd analyst Kenneth Leong concurs, saying the upcoming quarter is expected to post strong gains with double-digit growth on a quarterly basis, driven by a hike in ASPs.

However, he noted that the peak for Top Glove earnings has yet to come and adds that he expects the next following quarter to see even stronger earnings.

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As demand is expected to grow globally, Top Glove has said it will continue to expand its capacity to ensure it is well-positioned to fulfil global glove demand which is expected to grow at between 12% to 15% annually compared with the pace of 8% to 10% pre-Covid-19.

Top Glove quarterly profit soars on virus-driven demand

Malaysian glove maker Top Glove Corporation Bhd reported a multifold jump in quarterly profit today, beating analyst estimates, on strong global demand due to the coronavirus outbreak.

The world’s top glove maker posted its highest-ever net profit of RM1.29 billion for the quarter ended Aug 31, compared with RM74.2 million a year ago, surpassing the RM349.2 million analyst estimate from a poll by Refinitiv.

Revenue was up 161% year-on-year to RM3.11 billion.

Glove demand remains at a “supernormal level”, Top Glove said in a statement, estimating demand to grow 25% next year and 15% post-pandemic.

The firm said the protective gear would still be required when a vaccine becomes available.

The firm has also earmarked RM8 billion for capital expenditure over the next six years.

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