Rubber glove manufacturers were among the major gainers yesterday after the world’s largest glove maker, Top Glove Corporation Bhd, said it expected earnings for the financial year ending Aug 31, 2010 (FY10) to be between 70% and 80% higher than FY09, and FY11 earnings to increase by 20% from FY10.
Top Glove closed 28 sen or 2.09% higher at RM13.66, off its intra-day high of RM13.72.
Other glove makers Supermax Corporation Bhd, Kossan Rubber Industries Bhd, Hartalega Holdings Bhd, Latexx Partners Bhd, Rubberex Corporation (M) Bhd and Integrated Rubber Corporation Bhd (IRCB) all advanced yesterday.
Top Glove clarified to Bursa Malaysia Securities yesterday that the reported 70% to 80% growth referred to the performance of the year-to-date nine-month period in FY10. “The net profit for the nine-month period ended May 31, 2010 was at RM204.2 million, increased by 81% from the nine-month period ended May 31, 2009,” it said.
Top Glove also said the projected 20% earnings growth in FY11 was based on the compounded annual net profit growth rate of 36% over the last eight years.
For the third quarter ended May 31, 2010, Top Glove’s net profit surged 52.9% to RM64.48 million from RM42.17 million a year earlier. The company declared a first interim single-tier dividend of 14 sen net per share.
Top Glove’s 12-month trailing earnings per share (EPS) is 86 sen, while the estimated EPS for FY10 is 87.7 sen. Meanwhile, P/E is 15.89 times. As at June 25, there were two outperform, three buy and two hold recommendations on the stock.
MIDF Research said the interest in the glove makers yesterday could have been spurred by Top Glove’s views on the industry and its outlook for the company.
“We believe that although there is still upside for glove makers’ share price, underpinned by strong glove demand and fundamental, it might still need some positive newsflow to drive the share price, taking into account uncertainty in the industry, for instance, weaker US dollar, higher latex price, potential subsidy removal for natural gas, higher foreign worker levy and overcapacity.
“Demand wise, according to the department of statistics, glove export growth (in terms of quantity by tonnes) was 26% higher year-on-year for the cumulative first four months (January-April).
Inter-Pacific Research Sdn Bhd said most rubber glove manufacturers had sold forward until September 2010 despite the high selling prices due to latex price increase, adding that the expected global consumption was estimated to be around 155 billion pieces by 2011 from 135 billion in 2009.
It added that the increase in global consumption was due to growing healthcare awareness after the H1N1 pandemic, healthcare reforms by the US, China and India, recovery of global economy and rising living standards, local manufacturers’ investment into capacity expansion and potential untapped Asian markets such as India and China which Malaysian glove manufacturers have limited market share in.
This article appeared in The Edge Financial Daily, June 29, 2010.
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