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Results Note – Top Glove (ADD, maintain) - Low selling prices had pressured the bottomline growth




Affin Hwang Investment Bank Bhd


13 Jun 2013





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Low selling prices had pressured the bottomline growth 3QFY08/13 earnings fell (-5% yoy; -1.1% qoq) led down by low ASPs Top Glove’s (TOPG) 3QFY08/13 revenue grew by +4.8% qoq to RM604m, brought by healthy volume sales growth of +6.5%. We gather that the company’s nitrile glove sales has improved, comprising 18% of the group’s overall sales volume. (2QFY08/13:16%) Notwithstanding the healthy revenue growth, TOPG’s 3QFY08/13 EBITDA margin slipped -2%-points qoq to 8.9%. This is due to the sharp rise in operating cost (+7% qoq) affected mainly by the minimum wage policy. On a yoy comparison, TOPG registered a -5% declined in core earnings despite a strong +17% growth in volume sales. Key culprit was the sharp fall in average selling prices (ASPs: -15% yoy) to US$25.3/1000 pcs within the natural rubber latex gloves and higher labor cost. We gather that there were lower demands for the group’s latex gloves as customers begin to shift their usage to nitrile. Hence, TOPG has revised its ASPs downwards to remain competitive.

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