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Analysts continue bullish: Malaysian share rides on corona wave – what rubber has to do with it message


Corona crisis enforces hygiene measures
Malaysian manufacturer of disposable gloves as a beneficiary
Top glove with strong numbers in focus

Numerous healthcare stocks were in demand during the pandemic. In particular, companies from the pharmaceutical industry that work on vaccines & Co. received attention. But Top Glove, a rather inconspicuous company from Malaysia, is an outperformer – which is not really surprising. Because the company specializes in the production of one essential good, especially in the medical field: disposable gloves.

The company: A brief overview of Top Glove

Top Glove is a medium-sized company from Malaysia, based in Klang. The core product is rubber gloves – Top Glove claims to be the world’s largest manufacturer and has a market share of 26 percent. This is no coincidence, after all, the glove manufacturer sometimes meets the high medical standards in Germany.

The group headed by Lee Kom Meow has a workforce of 19,000 employees who work on 700 production lines. Up to 78.7 billion gloves can be produced each year – exports are now made in 195 countries around the world. In addition to disposable gloves made of latex, nitrile and Co., sterile surgical gloves are also part of the product range. The Southeast Asian company also produces household gloves.

Top Glove presents strong quarterly figures

On June 11, Malaysian company Top Glove presented its balance sheet for the third quarter ended May 31. Analysts already expected earnings to grow strongly in advance. But the manufacturer of rubber gloves was able to clearly surpass these estimates. Year over year, Top Glove increased net income by 366 percent to 347.9 million Malaysian ringgit over the first few months of its fiscal year – about $ 81.39 million. Sales increased by 42 percent and amounted to around 1.7 billion ringgit. Of this, 4.1 million ringgit accrued to Erlsen in the third quarter alone, as can be seen in the financial report.

As Top Glove announced, it was the “most outstanding achievement” of the 29-year company existence. The reason: In the wake of the corona pandemic, demand “from practically all countries in the world” has increased enormously. Meanwhile, product prices have risen by an average of around 30 percent since the beginning of the year, according to the Reuters news agency.

Top Glove share with exorbitant price performance during Corona

Top Glove shares are listed on the Malaysian stock exchange and in Singapore. The stock price has been showing a slight but steady upward trend since the beginning of the year – since the middle of May it has been going up almost inexorably, except for a temporary reset. In the wake of the pandemic, the share price more than tripled. Since the beginning of the year, the shares on the Malaysian exchange have increased by 255 percent, in Singapore the share price has increased to 256 percent.

Analysts remain optimistic about Top Glove stock

Numerous analysts are now optimistic about Top Glove’s shares. As CNBC reports, 18 out of 22 analysts commit to a “strong buy” or “buy” and thus recommend the share to buy. The average price target for the glove manufacturer’s paper is 20.28 ringgit. At the end of last week, the Top Glove share fluctuated above 16 Malaysian ringgits.

Ng Chi Hoong’s price target can almost be described as bullish. The analyst at the Malaysian investment bank Affin Hwang sees the title at 22.40 ringgit in the future. “In order to take into account the stronger demand prospects”, he justifies his ambitious price target. “We believe that concerns that demand may drop dramatically as new COVID-19 infections decrease are exaggerated as demand from China has continued to increase despite successfully controlling the spread of the virus,” affirmed Hwang -Analyst in a customer announcement.

Robust view from Top Glove

Hoong’s positive attitude is not without foundation. Finally, the group announced that Top Glove had “extremely robust quarters” ahead of it, which would be characterized by strong growth in demand and high capacity utilization. And this strength should not be limited to this year: “With an order backlog of one year in the pipeline, Top Glove is confident that it will deliver solid results not only for FY 2020 but also for FY 2021.” As Reuters quotes managing director Meow, people are afraid of bottlenecks and therefore book capacities well in advance.

It shouldn’t come as a surprise that Top Glove stock is in such high demand. Finally, in the past few weeks, companies have found a particularly large influx of investors when they are part of the health sector. Similar, but only with a lot more prominence, it was also the same for biotech stocks – for example because investors were hoping for a vaccine. The largest manufacturer of rubber gloves, however, should be less volatile. Finally, the company reports that capacities can be planned – this should not change over a longer period of time, so short-term hopes should not be disappointed here. It remains to be seen whether the Top Glove share will pick up on its newly found strength and become the next shooting star on the stock markets.

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