Topglov: The Gloves Are Off

Last Friday, Topglov announced that it have taken legal proceedings against Adventa Capital Pte Ltd (“Adventa”) vide the KL OS and the Singapore OS, as well as Low Chin Guan, Wong Chin Toh and ACPL Sdn Bhd (“ACPL”) vide the Writ Action on 29.6.2018 and 2.7.2018.

This is in relation to Topglov’s wholly-owned subsidiary’s Top Care Sdn Bhd (“Top Care”)’s purchase of the 270,850,119 shares in Aspion Sdn Bhd (“Aspion”) from Adventa Capital for a fixed amount of RM1.37 billion in January this year.

Topglov claimed that Adventa & its sponsors have made misrepresentations which resulted in Topglov & Top Care entering into the agreement to purchase Aspion. Topglov and Top care are claiming for a sum of not less than RM714,862,759 arising from a conspiracy to defraud them.

The loss of RM714.86 million for Topglov, with outstanding issue shares of 1.28 billion units, translates to a loss of 56 sen per share. Its NTA will be reduced from RM1.78 to RM1.22. If we exclude the impact of this one-off exceptional loss, Topglov (now at RM9.00 @9.45am) is trading at a PER of 26 times (based on  last 4 quarters' EPS of 34.3sen). That's fairly attractive for a rubber glove stock. Even Supermx is now trading at a PER of 28 times (based on price of RM4.50 & last 4 quarters' EPS of 15.9 sen).

Chartwise, Topglov's immediate support is at the horizontal line at RM8.00. next support will be at the tentative uptrend line, SS at RM6.50. 

Chart: Topglov's monthly chart as at july 9, 2018 (Source: Shareinvestor,com)

Based on good financial performance & attractive valuation, Topglov is a good BUY.