FIGURE 1: TOP GLOVE CORP BERHAD
LAST 5 YEARS SHARE PRICE TREND
**analysis
based on 2019 annual report.
1.
GENERAL INTRO: Top Glove is one of the major
glove manufacturers in Malaysia.
2.
NOTABLE POINTS:
a. In
its 2019 annual report, Top Glove is declared as the world's largest
manufacturer of gloves, which exports to 195 countries worldwide.
b. Nitrile
gloves generates the highest revenue (46%), followed by Latex powdered (21%),
Latex powder-free (18%) and others (15%). Sales of nitrile gloves is on
decreasing trend while sales of powdered and powder-free latex gloves are on
decreasing trend.
c. Top
Glove currently owns 33 glove factories, 682 production lines and has
production capacity of 64 billion pieces per annum. Expansion of production
capacity in progress to reach at 38 factories, 876 production lines and 84.2
billion pieces per annum capacity by December 2020.
d. Top
Gloves' last five years earning per share is steady, ranging from 12 to 17sen.
At current share price, P/E ratio is at relatively high level (31). High PE
level may be due to support by investors who are confident of the future
prospects of Top Glove, which likely to have increased earnings once factories
expansion has been completed.
3.
IS THIS COUNTER A STRONG GROWTH STOCK?
a. REVENUE
RANGE (million): ~4801 million in 2019 annual report, this is a high revenue
company.
b. SHARE
PRICE: from 2015-2019, share price dropped significantly in 2016 and 2018 due
to stock splitting. Most of the time share price steady at around RM5
c. EARNING
PER SHARE (EPS): earning per share in last 5 years were steady, range from 12
to 17 sen per share.
d. FUTURE
POTENTIAL/PROSPECTS: quite dependable and reliable counter, share price expected
to be stable.
e. CAPITAL
EXPENDITURE (CAPEX): spending on purchase of new fixed assets is RM 568
million, around 10% of total assets, due to factories expansion.
4.
IS THIS A STRONG DIVIDEND STOCK?
a. DIVIDEND
YIELD: in 2019 report, Top Glove declared a total dividend payout of 7.5 sen
per share, amounts to dividend yield of 1.63 % based on current share price.
b. CONSISTENCY:
consistent dividend payout, last five years (2015-2019) dividends declared range
from 5.75 to 8.5 sen per share.
c. DIVIDEND
PAYOUT RATIO: in last five years Top Glove consistently paid out about 50% of
its earnings to investors in the form of dividend.
5.
IS THE MANAGEMENT PERFORMANCE GOOD?
a. RETURN
ON EQUITY (ROE): in last five years, Top Glove has consistently good return of shareholders’
equity, range from 13 to 19%.
b. COST-TO-INCOME
RATIO: cost-to-income ratio is quite high about 1000%, Top Glove experiences
strong competition from other manufacturers, causes it to absorb some of the
increased cost, reducing profit margin.
6.
OTHER INDICATORS:
a. CASH
FLOW: cash flow is positive, around RM 159 million, equivalent to RM 0.06 per
share
b.
SUPPORT BY INSTITUTIONAL INVESTORS: this counter
is well supported by institutional investors, there are 18 institutional
investors at top 30 major shareholders list, including EPF (7.659%), Firstway
United Corp (7.173%), Kumpulan Wang Persaraan (3.8%) and few insurance
companies and investment funds. Also noted Mr. Lim Wee Chai, who is the founder
of the company, is also a major shareholder (26.801%).
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