This article first appeared in The Edge Financial Daily, on March 16, 2016.
KUALA LUMPUR: Top Glove Corp Bhd’s proposal to seek a secondary listing on the mainboard of the Singapore Exchange (SGX) did not add much excitement to the glove maker’s share price that has retreated from its record high of RM6.69 in January.
Analysts who track the stock concur it is a positive move, as it provides the world’s largest glove maker a platform to tap into another equity market.
“Basically, a secondary listing is a way for the company to market its shares on an international platform, and will provide better exposure to foreign participants.
“From a shareholder’s perspective, it provides options to seek better valuations in the Singapore stock market,” said TA Securities research analyst Wilson Loo.
In its announcement to Bursa Malaysia on Monday, Top Glove noted that it intends to explore with its substantial shareholders the possibility of selling a portion of their shareholdings in the company of approximately S$20 million (RM60.14 million) in value in the open market in Singapore.
However, Maybank Investment Bank Research said that Top Glove already offers high liquidity, and the S$20 million share sale by its main shareholders works out to about 1% of total shares issued, which will not add substantially into its liquidity.
“Additionally, valuations of SGX-listed glove players are also below that of Bursa Malaysia-listed glove players, hence the secondary listing will not boost Top Glove’s valuations,” the research house said in its note yesterday.
Meanwhile, MIDF Research said Top Glove’s SGX listing will allow the company to exercise flexibility in terms of raising funds for both growth and operations in the future.
“Furthermore, as the company is actively looking into mergers and acquisitions (M&A) of smaller players and glove-related players, we think the listing will assist in broadening the company’s M&A horizon and boost attractiveness to both potential targets and also future investors,” said MIDF in its note yesterday.
Top Glove is expected to release its quarterly result today.
UOB Kay Hian Malaysia analyst Lester Chin Kent Lake told The Edge Financial Daily that he expects Top Glove’s earnings to be weaker in the the second financial quarter ended Feb 29, 2016 (2QFY16) due to the weaker US dollar and the recovery in latex prices.
Another analyst begs to differ, expecting Top Glove’s 2QFY16 results to be as good as in 1QFY16, even though the ringgit has strengthened by about 7% since January 2016.
“Based on [an] average basis, [in] 1QFY16 (September to November 2015) the ringgit stood at 4.2919 against the US dollar, while in 2QFY16 (December 2015 to February 2016) the ringgit was at 4.2673. The US dollar only depreciated 1% on a q-o-q (quarter-on-quarter) basis,” she said.
“Drivers for the group include its continuous cost efficiency and robust demand for gloves. The Malaysian Rubber Glove Manufacturers Association is expecting glove annual growth rate at 6% to 8% this year,” the analyst added.
For 1QFY16, Top Glove’s profit more than doubled to RM128.3 million from RM48.7 million in 1QFY15. Revenue, meanwhile, was at an all-time quarterly high of RM800.3 million, a 41% increase from RM567.6 million a year ago.
Top Glove’s share price was unchanged at RM5.35 yesterday, with a market capitalisation of RM1.25 billion. The stock has fallen 21.5% year-to-date.