RHB Research has downgraded Top Glove Corp Bhd to underperform from market perform based on the weaker earnings outlook.
The research house said on Tuesday, Sept 28 it had cut its target PER to 12.5 times from 15 times and lowered the fair value to RM5.30 (from RM6.90).
Top Glove is expected to announce its full-year results on Oct 6. While it expects weaker numbers on-quarter, for the full-year, it sees on-year growth of approximately 40%-45% largely due to higher sales volume; and margin expansion on the back of better economies of scale.
On-quarter, RHB Research expects earnings to be weaker on the back of weaker revenue; and margin contraction largely due to time lag in passing on weakening US dollar.
“We have kept our FY10 earnings forecast unchanged for now. However, we have lowered our FY11 and FY12 forecasts by 10.4% and 9.7% after lowering our corresponding capacity utilisation rate assumptions,” it said.
At 2.32pm, Top Glove shares are unchanged at RM5.25. There were 645,800 shares transacted at prices ranging from RM5.21 to RM5.31.
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