Topglov had reported its results for QE29/02//2012 recently. Its net profit increased by 70% q-o-q or 110% y-o-y to RM53.5 million while turnover increased by 13% y-o-y but dropped marginally by 1% q-o-q to RM549 million. The improved bottom-line was attributed to due to 18% drop in latexx prices & strengthening of the USD.
Table: Topglov's last 8 quarterly results
Two Main Determining Factors examined
The financial performance of Topglov, like many rubber glove producers, is heavily dependent on favorable movement in Rubber latexx prices & USD. From the two charts - Chart 1 & Chart 2 - below, we can see that USD's near term outlook is mildly bearish but the medium-term outlook is still favorable. Rubber prices (used as a proxy to rubber latexx price) is in a downtrend after it peaked at February 2011. Is this downtrend over? It is hard to tell as both the 5 & 10-month SMA lines are still heading lower. If the USD & runner latexx prices remained at the present level, we can expect continued good results for Topglov. As you can see from Chart 3, Topglov's profit margin has recovered substantially in the last quarter.
Chart 1: USD daily chart as at March 20, 2012 9Source: Stockcharts)
Chart 2: Rubber Monthly Price Chart as at March 19, 2012 (Source: indexmundi.com)
Chart 3: Topglov's profit margin for last 27 quarterly results
Chart 4: Topglov's last 27 quarterly results
Valuation
Topglov (closed at RM4.82 yesterday) is now trading at a PE of 22 times (based on the last 4 quarters' EPS of 22.08 sen). At this PE multiple, Topglov is deemed fully valued.
Technical Outlook
Topglov had broken above its intermediate downtrend line (RR) at RM4.70 in December 2011. A medium-term uptrend line (SS) has also formed with support at RM4.70. For now, I believe the stock can stay above the 200-day SMA line at RM4.82.
Chart 5: Topglov's daily chart as at March 20, 2012 (Source: Tradesignum)
Conclusion
Despite the good financial performance & positive technical outlook, Topglov is rated a HOLD due to its high valuation. If the financial results improved further, Topglov could be rated a BUY.
5 comments:
Hi
Pls comment supermx n latexx after reading topglov posted by u...
oso the century n maybulk as the BDI show uptrend http://www.bloomberg.com/quote/BDIY:IND
What do u think abt mflour for the dividen 62sen?
TQ
Hi Alex,
Good day!
what is your view on Harrison case as below?
"Harrisons Trading (Sabah) Sdn Bhd our wholly owned subsidiary had on 21 February 2012 received a letter of demand dated 15 February 2012 from Kastam DiRaja Malaysia demanding payment of the sum of RM91,750,418.90 for purported unpaid"
Do you have any comment to share on this case?
Thanks.
Heng.
Hi Alex,
Can comment on Texchem again?
Hi KENNY BLOG
I am positive on Texchem's substantial sale of the controlling stake in two subsidiaries to Fumakila Ltd, Japan. These two companies would probably grow faster under the management control of Fumakila than under Texchem. Texchem will still ripe some benefit from these companies going forward but most importantly, its financial position will be substantially improved with the receipt of the sale proceed of USD42.4 million.
Chartwise, Texchem has broken above its horizontal resistance at RM0.66. Its next resistance is at RM0.76.
Hi cheer
Supermx is hanging onto its support at RM1.90 while Latexx will try to find its support at RM1.50. I am positive on Supermx but negative on Latexx.
The recovery in BDI is still at the early stage. The market perception is that the shipping glut may need another 2 years work out.
On MFlour, I like to see the stock surpassing its recent high of RM4.66 before turning positive on it.
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