Topglov: Earnings Dropped Sequentially

Results Update

For QE31/5/2017, Topglov's net profit dropped 6% q-o-q but rose 24% y-o-y to RM78 million while revenue rose 2% q-o-q or 29% y-o-y to RM870 million. PBT dropped q-o-q resulting from the time lag in passing on cost to the customers, as average prices for natural rubber latex and nitrile latex rose 18.7% and 24.1% respectively.

 
Table: Topglov's last 8 quarterly results


Graph: Topglov's last 44 quarterly results

Valuation

Topglov (closed at RM5.61 last Friday) is now trading at a trailing PE of 23.5X (based on last 4 quarters' EPS of 23.92 sen). At this PER, Topglov is deemed fully valued.

Technical Outlook

Since it made a high of RM7.00 in December 2015 & January 2016 - coincided with its blown-out net profit of RM128 million in November 2015 - Topglov is moving within a rising trading range (AB A'B'), currently at RM4.50 & RM5.60. Last week, it broke to the upside of the trading range and made a high of RM5.95 on June 9. It is now resting just above its trading range or will it breakdown into the trading range again?

 
Chart 1: Topglov's weekly chart as at as at Jun 16, 2017 (Source: ShareInvestor.com)
 

Chart 2: Topglov's monthly chart as at as at Jun 16, 2017 (Source: ShareInvestor.com)

Conclusion

Based on weaker financial performance, full valuation & unexciting technical outlook, I think it may be a good idea to take some profit on Topglov. Thus I revise my rating for Topglov from a HOLD to a REDUCE.

Note:

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.