Topglov: Earnings Remained Healthy

Results Update

For QE31/8/2018, Topglov's net profit dropped 13.6% q-o-q but rose 3.0% y-o-y to RM102 million while revenue rose 10.6% q-o-q or 34.8% y-o-y to RM1,22 million. The q-o-q increase in revenue is attributed to sales volume grew 6% versus 3QFY18. The improved performance was attributed to improvements in higher gloves volume sold, production efficiency and quality, coupled with new capacity coming onstream and strong demand growth. However, Profit After Tax was softer, impacted by higher tax expense. The upward trend in nitrile latex prices compared with 3QFY18 also caused some pricing pressure. The average natural rubber latex price eased 2.7%, while the average nitrile latex price was on the uptrend, increasing by 13.9%.

 
Table: Topglov's last 8 quarterly results


Graph: Topglov's last 49 quarterly results

Financial Position

Topglov's financial position is deemed satisfactory with adequate current ratio at 1.15 times while gearing ratio is elevated at 1.18 times.

Valuation

Topglov (closed at RM10.78 last Friday) is now trading at a trailing PE of 31X (based on last 4 quarters' EPS of 34.40 sen). At this PER, Topglov is deemed fully valued.

Corporate Exercise 

Topglov has proposed a 1-for-1 bonus issue which will go ex on Oct 24.

Technical Outlook

Topglov has to surpass the July high of RM12.48 to regain its uptrend again. The sudden plunge from that recent high came about when it announced that its acquisition of Aspion Sdn Bhd from Adventa Capital Pte Ltd was based on misleading information, and that it would be taking legal action to recover the loss (here).


Chart 1: Topglov's weekly chart as at Oct 12, 2018 (Source: Malaysiastock.biz)


Chart 2: Topglov's monthly chart as at Oct 12, 2018 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance and an upcoming bonus issue, I think Topglov will likely to continue its uptrend. 

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.