ShareInvestor Academy Malaysia
Trade with knowledge.
- Posted on December 25, 2019 March 6, 2020
- by Shareinvestor Academy
Case Study of Top Glove Corporation Bhd (7113)
By Stella Goh – Market Data Analyst | 25 December 2019
Top Glove Corporation Bhd is an established Malaysia-based investment holding company founded in the Year 1991 by Tan Sri Dr Lim Wee Chai and Siew Bee Tong based in Shah Alam, which primarily involved as the world’s largest rubber glove manufacturer in Malaysia, specialise in both healthcare and non-healthcare segments.
TOPGLOV was listed in ACE Market in 2001 and successfully transformed into Main Market of Bursa Malaysia on 16 May 2002. The group serves a network of over 2,000 satisfied customers in more than 195 countries worldwide, and these numbers are still increasing. Their complete range of quality gloves at low efficient cost enables them to meet the needs of the company’s ever-expanding customer base.
Presently, TOPGLOV has few manufacturing operations spanning across Malaysia, Thailand and China. There are marketing offices in these countries as well as USA, Germany and Brazil.
Top Glove Corporation Bhd principally involved in the business segment such as hand protection, sexual wellness, dental care and others.
TOPGLOV provides a comprehensive range of products such as latex examination gloves, nitrile examination gloves, surgical gloves, polychloroprene examination gloves, cast polyethene (CPE) gloves, thermoplastic elastomer (TPE) gloves, vinyl gloves, cleanroom gloves, household gloves, industrial gloves as well as non-gloves products such as dental dam, exercise band and condom.
Most of the glove products cater to the medical profession, surgeon, cleanrooms and industrial usage as well as aerospace, household, food and beauty industries.
Based on the past 5 financial years of revenue chart above, the group’s revenue grew years-on-years (y-o-y) from FY2015 (+10.33%), FY2016 (+15.06%), FY2017 (+18.03%), FY2018 (+23.81%) to FY2019 (+13.75%). On a CAGR basis, TOPGLOV has grown 16.11% based on 5 years. The increase in revenue was mainly due to robust growth in sales volume of nitrile gloves segments which saw a 30% surge, enhanced the marketing efforts as well as additional nitrile capacity which has increased by 54% over the past 2 years, with the plan for further expansion. (Source: Annual Report 2019).
Top Glove Corporation Bhd has successfully recorded a considerable RM41,627 million increase in gross profit, translating to a growth of 4.94% from RM842.4 million in FY2018 to RM884 million in FY2019. Based on 5 years CAGR basis, the group has grown 18.18%. The increase in gross profit was mainly attributed to 46% jump in volume sold for surgical glove segment which largely due to the contribution from Aspion and increases in demand for nitrile glove segment, which sales volume go up by 20.3% and 24% respectively chiefly by US and Japan. (Source: Annual Report 2019)
The Net Profit After Tax (PAT) of TOPGLOV has decreased 15.16% from RM433.2 million in FY2018 to RM367.5 million in FY2019. The decreased in Net Profit After Tax (PAT) was mainly due to the increase in latex concentrate prices, competitive environment for natural gloves as well as the losses occurred in the vinyl segment due to oversupply in China.
Cash Flow Statements
The net cash from operating activities has obtained a positive cash flow of RM526.2 million in FY2019 compared to RM341.2 million in FY2018 indicates that the company is healthy and have enough cash used for business expansion.
The net cash from investing activities in FY2019 is (-RM493.5 million) was mainly due to purchase of property, plant and equipment (RM568.1 million), purchase of land use rights (RM55.6 million), purchase of intangible assets (RM0.016 million), additions to investment property (RM0.393 million), purchase of investment securities (RM138.4 million), an increase in the bank balance pledged with banks (RM1.1 million). The negative cash flow indicates that the company is investing in its business to grow.
The net cash from financing activities in FY2019 is (-RM34.6 million) was mainly due to the transaction cost incurred (RM0.086 million), dividends paid on ordinary shares (RM217.4 million), dividends paid on non-controlling interest (RM2.7 million), repayment of loans and borrowings (RM1.2 billion).
Based on liquidity ratio calculation, TOPGLOV has a current ratio of 0.967 times in FY2019 indicates that the company may face some liquidity issue if any unforeseeable circumstances forcing the company to settle the current liabilities by using the current assets such as inventories, other current assets, tax recoverable, investment securities, derivatives financial instruments, trade & other receivables, cash and bank balances amounting to RM1.5 billion.
Prospect and Challenges
The domestic rubber sectors are expected to be a bounce-back in FY2020, as the US buyers will be likely to increase the Malaysian shipments as well as 15% additional tariff imposed on medical gloves made in China, effective from 1 Sep 2019. (Source: The Malaysian Reserve, 17Dec2019). The expected robust growth is underpinned by an expanding of the global healthcare sector as well as increased awareness of the importance of hygienic practices throughout the industry, especially the emerging markets such as India and China. (Source: TheEdge, 12Dec2019).
TOPGLOV will be in expansion mode as there is an influx of latex glove supply from Thailand-based Sri Trang Agro-Industry Pcl aims to increase the rubber glove output by about 74% to 30 billion gloves annually by the end of FY2020 from 22 billion in the nine months of FY2019. (Source: TheEdge, 12Dec2019). TopGlove also has date established a total of 4 R&D Centres staffed by some 454 researchers (as at FY19) from across varied fields of expertise, working together to drive innovation and breakthrough at Top Glove. (Source: Annual Report 2019).
TOPGLOV has set aside about RM100 million for land acquisition in the country would be used for setting up the factories to produce vinyl gloves. TOPGLOV also will open its first Vietnam factory to meet a surge in demand for the hygienic gloves. As the construction of the plant has started in Vietnam, it is done deal there and the operation would commence in the first quarter of 2020. (Source: Daily Express, 21Mar2019).
In the year-end of FY2019, TOPGLOV has carried out large scale line modification, key process improvements as well as intensive training for factory floor personnel. They are also pleased to report that there is no impairment loss required for the provisional goodwill arising from the acquisition of Aspion as at 31Aug2019. (Source: Annual Report FY2019).
TOPGLOV is also developing the eco-friendly gloves, the first if which was their flagship green product, BiogreenTM Biodegradable Nitrile Gloves (Powder Free), launched in June 2019. They also continue to enhance their product portfolio with more specialised and cost-effective surgical gloves, while diversifying into non-glove products such as tourniquets. (Source: Annual Report FY2019).
Return on Equity (ROE) = Average
Revenue [5 years CAGR] = Good
Net Earnings [5 years CAGR] = Average
Basic Earnings per Share [5 years CAGR] = Average
Interest Coverage = Average
Based on my calculation on Discounted Earnings Model, TOPGLOV has a fair value of RM8.40. The current market value of TOPGLOV is RM4.77 which is undervalued (Based on 23Dec2019). TOPGLOV has a beta of 1.020 (500 days) indicates that the company is more volatile than the current market, which means the investors/traders are actively trading in this stock, they may face a higher risk. Based on my computation of Compound Annual Growth Rate (CAGR), TOPGLOV has an expected market return of 6.27%.
In conclusion, Top Glove Corporation Bhd has achieved an outstanding performance for revenue in FY2019 due to the robust growth in sales volume of nitrile gloves segments and capacity of nitrile segment expansion. Even though the Profit After Tax has slightly decreased in FY2019, I still believe that the company is well-positioned to tap on the growing glove demand and prioritise R&D, innovation and Industry 4.0 initiatives.
Disclaimers The research information and financial opinions expressed by ShareInvestor.com website are for information and education purpose only. We do not make any recommendation for the intention of trading purpose or advice. Although best efforts are made to ensure that all information is accurate and up to date, occasionally unintended errors and misprints may occur, it would help if you did not rely upon the material and information on this website. We will not be liable for any false, inaccurate, incomplete information and losses suffered from your action. It would help if you did your research to make your own investment decision wisely.
The price of latex will fluctuate accordingly. This also means that the prices of the products made from it will increase, too. Nitrile products are less volatile compared to latex mainly because it is a mostly man-made product, and because production techniques are getting better, the price of nitrile is much less likely to fluctuate in response.
Leave a Reply Cancel reply
Your email address will not be published. Required fields are marked *
Save my name, email, and website in this browser for the next time I comment.
Top Glove Case Study
Personal narrative-mollie from jennings brae bank farm.
It was an autumn morning- the crisp September breeze was rattling the newly bare tree limbs, leaves of crimson red, orange and golden tones covered the ground like a soft blanket, and the smell of freshly bailed hay roamed the little parking lot full of vendors. As I got out of my car to walk under the festive tents a lady who seemed quite important and knowledgeable about the Bridgeport Farmers Market walked by ringing a bell. People started traveling through the tents discussing with vendors and other shoppers about an array of things; like the weather or ‘this eggplant color is so rich’ or ‘the healing power of the cookbook.’ Quickly, the small little shopping center that was filled with vibrant colored fruits, vegetables, and flowers became extremely loud. Conversations and chatter were surrounding me as I began to enter the tiny outdoor supermarket.
Deaf N Jug Observation
I arrived at the Loaf N Jug located at 59 S. Curtis at 10:15 a. m. and observed 7 cars in the parking lot and 3 cars purchasing fuel. The exterior of the building was clean, well maintained and the overall appearance was inviting. Entering the store, the cashiers were engaged with customers so I proceeded to walk up and down the aisles looking at the shelves and floor area. They both appeared stocked and organized.
How Clarence Psyck Changed My Life
As I walk through front door, numerous shoulder mounts of trophy animals line the walls along with an occasional fish mount. My taste buds water as the delightful smell of freshly smoked sausage fills my nose. The “cha-ching” of the cash register is a sign business is booming. In the back of the store, the bandsaw is screaming, and the grinder is crunching. My Grandpa, Clarence Psyck Jr., bought the business in 1969 from his father, Clarence Psyck Sr., so I was born into the business.
An American Seduction Susanville Analysis
The presence of large companies made it hard for Susanville’s small business to stay afloat, many closed due to this. Fraser makes this point, because the loss of those small business, made Susanville lose its small town
Blueberry Persuasive Research Paper
“Merchants are afraid to open stores, and there is little outside development from major retailers or manufactures.” (pg.163) The residents of Blueberry may have lost all hope for change; however with this proposal I have a solution. In order to revitalize the city of Blueberry, I have created
Rehabilitative Forces In Sidewalk, By Emile Duneier
When people of a magazine vendor’s socioeconomic class succumb to this level of an unorthodox lifestyle of the street, some people may lose hope in the world. By building and maintaining a relationship with clients, street vendors have the opportunity to restore a usefulness in the form of providing a service. In Sidewalk a client, named Jack, of these specific vendors once stated, “I kind of miss Marvin and Ron sometimes” (Duneier 71). It is incredible how these vendors are able to have such an affect, such a deep relationship with their cliental when at times they have struggled to have relationships with their own families. Ron and Marvin’s line of unorthodox work, or how they refer to it, their hustle, allows for them to bring more meaning to their lives, bettering themselves with each customer
Case Study: Maisey's Daisies
This paper will discuss Maisey’s Daisies, a family-owned flower shop founded in 2008. This medium-sized business founded just eight years ago is in need of revival and has plans. The business has a culture similar to that of a small family. The organization is very flat having only owners, managers and employees. Employees are viewed as partners and are treated with dignity and respect.
Training Transfer Self Assessment Strategies
Stage 1-Precontemplation: Stage 2-Contemplation: Stage 3-Preparation: Stage
Tetracycline Lab Report
After the spraying, plates were left for at least 1hour at room temperature and then in an oven at 110oc for 1 hour in order to activate themit before use. Then, a 2µl of solutions of separate individual and mixture of reference standards (OTC and TC) in methanol were applied on HPTLC
Electrolytes And Carbohydrates Essay
Therefore, a combination needs to be perfected in order to optimize energy
One of the nicest things about essential oils is the grand variety of things you can use them for and the stunningly wide range of ways in which you can use them. I have tried to break these many methods down into categories and give you simple instructions for each method. DIRECT/TOPICAL APPLICATION Because of the molecular structure of essential oils (the molecules are extremely small and the chemical structure is quite simple), they absorb readily into the body through the skin. This effect can actually be increased by the use of a good carrier oil.
All The Names
Now, place that small cottage amid a busy, bustling city. A city where the streets are lined with people for blocks as far as the eye can see, and the sounds of car horns pollute the air. Where gripes and grumbles contaminate the environment, and there is not a single tree in sight, only the pavement that runs on for miles and miles. Like the small cottage, All the Names, is one of those
Life Cycle Assessment (LCA)
In practice this stage is often composed of a series of substages with intermediate products being formed along the processing chain. (c) Distribution and Transportation Shipment of the final product to the end user. (d) Use, Reuse and Maintenance Utilization of the finished product over its service. (e) Recycle Begins after the product has served its initial intended function and is subsequently recycled within the same product system (closed-loop recycle) or enters a new product system (open-loop
Process Analysis And Design At SBD
Section A 1.1 Introduction Process Analysis and Design is a systematic attitude to improve our understanding of the business processes of an organization or better still a roadmap or strategic approach to achieve a unique expectation, it assists in the realization of tangible benefits such as cost reduction, process efficiency, and effective human resource allocation and how and what to do within political, legal, social, environmental, safety and economic constraints in achieving the set objective. The processes and methods used to transform tangible inputs i.e. raw materials, semi-finished goods, subassemblies and intangible inputs such as ideas, information, knowledge into goods or services largely depends on effective management. Process
Metal Fabrication Research Paper
There certain kinds of industries which very much shape the way that the world operates and are indispensible for our progress. Fabrication is one such industry and is a manufacturing process in which an item is made from raw finished materials instead of being assembled from ready-made components or parts. Fabrication work leads to creation of many wonderful metal products to be used in a variety of situations in our daily lives from vehicles, factories to protective grills and others. The
More about Top Glove Case Study
- Medical Equipment
Top Glove Corporation Bhd.'s (KLSE:TOPGLOV) Stock Has Shown Weakness Lately But Financial Prospects Look Decent: Is The Market Wrong?
It is hard to get excited after looking at Top Glove Corporation Bhd's (KLSE:TOPGLOV) recent performance, when its stock has declined 18% over the past month. However, the company's fundamentals look pretty decent, and long-term financials are usually aligned with future market price movements. Particularly, we will be paying attention to Top Glove Corporation Bhd's ROE today.
Return on equity or ROE is a key measure used to assess how efficiently a company's management is utilizing the company's capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company's shareholders.
See our latest analysis for Top Glove Corporation Bhd
How To Calculate Return On Equity?
The formula for ROE is:
Return on Equity = Net Profit (from continuing operations) ÷ Shareholders' Equity
So, based on the above formula, the ROE for Top Glove Corporation Bhd is:
4.1% = RM282m ÷ RM6.8b (Based on the trailing twelve months to August 2022).
The 'return' is the amount earned after tax over the last twelve months. That means that for every MYR1 worth of shareholders' equity, the company generated MYR0.04 in profit.
Why Is ROE Important For Earnings Growth?
So far, we've learned that ROE is a measure of a company's profitability. We now need to evaluate how much profit the company reinvests or "retains" for future growth which then gives us an idea about the growth potential of the company. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don't necessarily bear these characteristics.
A Side By Side comparison of Top Glove Corporation Bhd's Earnings Growth And 4.1% ROE
It is hard to argue that Top Glove Corporation Bhd's ROE is much good in and of itself. A comparison with the industry shows that the company's ROE is pretty similar to the average industry ROE of 4.1%. However, the exceptional 46% net income growth seen by Top Glove Corporation Bhd over the past five years is pretty remarkable. We reckon that there could also be other factors at play thats influencing the company's growth. For example, it is possible that the company's management has made some good strategic decisions, or that the company has a low payout ratio.
We then performed a comparison between Top Glove Corporation Bhd's net income growth with the industry, which revealed that the company's growth is similar to the average industry growth of 49% in the same period.
The basis for attaching value to a company is, to a great extent, tied to its earnings growth. The investor should try to establish if the expected growth or decline in earnings, whichever the case may be, is priced in. By doing so, they will have an idea if the stock is headed into clear blue waters or if swampy waters await. Has the market priced in the future outlook for TOPGLOV? You can find out in our latest intrinsic value infographic research report.
Is Top Glove Corporation Bhd Making Efficient Use Of Its Profits?
While the company did pay out a portion of its dividend in the past, it currently doesn't pay a dividend. This is likely what's driving the high earnings growth number discussed above.
Overall, we feel that Top Glove Corporation Bhd certainly does have some positive factors to consider. Despite its low rate of return, the fact that the company reinvests a very high portion of its profits into its business, no doubt contributed to its high earnings growth. Having said that, the company's earnings growth is expected to slow down, as forecasted in the current analyst estimates. To know more about the latest analysts predictions for the company, check out this visualization of analyst forecasts for the company.
Valuation is complex, but we're helping make it simple.
Find out whether Top Glove Corporation Bhd is potentially over or undervalued by checking out our comprehensive analysis, which includes fair value estimates, risks and warnings, dividends, insider transactions and financial health.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Top glove corporation bhd.
Top Glove Corporation Bhd. engages in the investment holding and provision of management services in Malaysia.
High growth potential with excellent balance sheet.
Klse:kossan, market insights.