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Results Note – Top Glove (ADD, maintain) - FY08/13 earnings fell -3.8% yoy to RM195m




Affin Hwang Investment Bank Bhd


13 Oct 2013





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Pricing pressure on NR-based latex gloves Notwithstanding the overwhelming growth in sales volume (+18% yoy) driven by Top Glove's (TOPG) expanded production capacity, FY08/13 revenue was flat yoy at RM2.3bn. A key reason for this is the sharply lower average selling price (ASP) for its core Natural Rubber (NR) gloves product, which has been declining in tandem with the fall in latex cost (-17.5% yoy) (FY08/12 average latex price was: RM7.10/kg vs FY08/13’s RM5.91/kg). Furthermore, the continuous switch to nitrile gloves by its key customers has further exerted pricing pressure on its NR gloves products. Taken together with a higher interest expense and higher effective tax rate of 15.4% vis-a-vis FY08/12's 13.9%, TOPG's core earnings slipped -3.8% yoy to RM195m. Results were within our expectation but slightly below consensus, accounting for 103% and 94% of Affin and street’s forecast. The group declared a final single tier interim dividend of 9 sen/share, bringing FY08/13's DPS to 16 sen, translating to a yield of 2.6% - payout ratio was marginally higher at 49%. (FY08/12 DPS was 16 sen)

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