Topglov: Profit Increased

Results Update

For QE28/2/2015, Topglov's net profit rose by 15% q-o-q or 35% y-o-y to RM56 million while revenue inched higher by 1% q-o-q or 4% y-o-y at RM572 million. Revenue increased marginally q-o-q due to a stronger US Dollar. Its PBT rose to  RM69.6  million,  mainly  attributed  to  ongoing  efficiency, quality enhancement initiatives, lower raw material prices and a stronger US Dollar. Raw material prices continued to trend down compared to same quarter last year, as both natural rubber and nitrile latex prices fell by around 7.0%.


Table: Topglov's last 8 quarterly results


Chart 1: Topglov's last 35 quarterly results

From Chart 2 below, we can see that both Harta & Kossan's revenue had made a new high. Due to a fire in one of its plants, Supermx's revenue had been eratic. On the other hand, Topglov's revenue had yet to make a new high.


 Chart 2: Harta, Kossan, Supermx & Topglov's PL


From Chart 3 below, we can see that Topglov's profit margin has been rising for the past 2 quarters. Given that Topglov's numbers are 2 months ahead of its competitors - benefiting a bit more from the lower prices of raw material & weaker Ringgit - this trend seems promising. Nevertheless, it must be noted that Topglov's PBT margin still lags behind its competitors, Kossan & Supermx (both PBT margin at ~14%) as well as Harta (with PBT margin of 25%).


 Chart 3: Harta, Kossan, Supermx & Topglov's Profit margin

Valuation

Topglov (closed at RM5.20 yesterday) is now trading at a PE of 16.7 times (based on last 4 quarters' EPS of 31.17 sen). At this PE multiple, Topglov is fully valued.

Technical Outlook

From the chart below, we can see that Topglov share price rose in an uptrend from 2002 to 2010 and since then, it has been moving within a large trading range (with support at RM4.20 & resistance at RM6.20). Indicators are signaling an upswing in the share price- as noted in my earlier post.


Chart 4: Topglov's monthly chart as at Mar 18, 2015 (Source: ShareInvestor.com)
 
 If we looked at the weekly chart, we can see a triangle, ABC.


Chart 5: Topglov's weekly chart as at Mar 18, 2015 (Source: ShareInvestor.com)

Conclusion

Based on better financial performance & mildly positive technical outlook, Topglov is rated a Trading BUY.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Topglov.