Sunday, June 13, 2021

TOPGLOV: Top-line & Bottom-line Finally Reversed

Result Update

For QE31/5/2021 (3QFY2021), Topglov's net profit dropped 29% q-o-q but rose 485% y-o-y to RM2.036 billion while revenue dropped 22% q-o-q but rose 147% y-o-y to RM4.163 billion. The Group’s softer quarter-on-quarter performance for 3QFY2021 came on the back of adjustments in line with glove market pricing trends, after ASPs had peaked in February 2021. The Sales Volume (Quantity Sold) dropped 4% quarter-on-quarter mainly due to reduction in sales to the U.S., following a temporary halt in shipments to the U.S. from Malaysia, in compliance with requirements of the U.S. Customs and Border Protection. Raw material prices for the quarter ended 3QFY2021 rose from 2QFY2021, with average natural latex concentrate prices up by 8% from RM5.85/kg to RM6.31/kg, whilst nitrile latex price increased marginally by 0.4% from USD2.30/kg to USD2.31/kg.

There you have it; lower sales volume coupled with lower ASPs mean lower revenue, and lower ASPs coupled with slightly higher raw material cost mean lower profit margins.  

Table: Topglov's last 8 quarterly results

Graph: Topglov's last 60 quarterly results

Financial Position

As at 31/5/2021, Topglov's financial position is deemed healthy with current ratio at 1.9 times and Total liabilities to Total equity at 0.50 time.


Topglov (closed at RM4.72 last Friday) is now trading at a trailing PE of 4.4 times (based on last 4 quarters' EPS of 106.80 sen). This exceptionally low PE ratio reflects investors' perception that Topglov's future earnings must decline in the near term due to average selling prices & profit margins normalization. This is not unreasonable given the glove demand has been driven by the Covid-19 pandemic, which is expected to be brought under control with the arrival of vaccines worldwide.

I wrote about the possible scenarios of ASPs & profit normalization in my last post on Topglov (here). If Topglov were to trade at its past PE of 31-32 times, then the market is now projecting its 4-quarter net profit of RM1.344 billion in next few quarters. That means its quarterly net profit would be about RM336 million. 

As noted in that post, if the above projection is proven to be too pessimistic, then the market will revise its outlook and the share price will go up, or vice versa

Technical Outlook

Topglov's immediate support is at the horizontal line of RM4.70. If that support failed, the next support is at the horizontal line of RM4.50.

Chart: Topglov's daily chart as at June 11, 2021 (Source:


Based on the current strong financial performance, healthy financial position and fairly attractive valuation, Topglov makes a very appealing case as a value stock for long-term investment. However the arrival of vaccines and their positive impact in controlling the spread of the pandemic have changed the narrative of investing in pandemic stocks. The question of whether Topglov is a value stock or a value trap still remain unchanged for now.


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.

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