M'sian glovemakers now more valuable than casino, airport operators

This article first appeared in The Edge Financial Daily, on April 14, 2020.
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KUALA LUMPUR: Top Glove Corp Bhd, the world’s largest glove manufacturer in terms of capacity, saw its market capitalisation (cap) hit a record high of RM17.09 billion yesterday, as its share price climbed 17 sen or 2.6% to settle at RM6.67.

In the span of about four and a half months, Top Glove’s market cap has ballooned by about 41.91% or RM5.06 billion, following unprecedented demand spikes in protective medical equipment like rubber gloves amid the relentless spread of the Covid-19 pandemic.

Likewise, its rival Hartalega Holdings Bhd’s share price has also been on the climb. Hartalega’s share price closed at RM7.42 yesterday, its highest in about three years, with a market capitalisation of RM25.10 billion. Year to date, Hartalega’s market cap has surged 35.82%, which translates into an increase of RM6.62 billion.

Notably, Top Glove’s market cap is now more than two times the market cap of Malaysia Airports Holdings Bhd (MAHB), which stood at RM7.33 billion based on its closing price of RM4.42 yesterday. MAHB is the operator of all Malaysian airports. It also owns as well as manages an international airport in Turkey.

At the same time, the glovemaker’s market cap has surpassed those of casino and plantation owner Genting Bhd and its listed entity Genting Malaysia Bhd, which stood at RM14.42 billion and RM12.35 billion, respectively.

Likewise, Top Glove’s market value has overtaken Southeast Asia’s largest aluminium smelter, Press Metal Aluminium Holdings Bhd’s, which was at RM14.74 billion as of its last traded price of RM3.65. It is also higher than that of national telecommunications giant Telekom Malaysia Bhd’s RM14.23 billion, based on its closing price of RM3.78 yesterday.

In fact, Top Glove’s market cap has also topped the RM14.06 billion of KLCC Stapled Group, who is the proud owner of the Petronas Twin Towers, Menara ExxonMobil and several other prominent buildings in the Kuala Lumpur city centre.

Remarkably, the cumulative sum of Top Glove’s and Hartalega’s market cap has exceeded the combined market cap of some of the biggest names in consumer products, namely Fraser & Neave Holdings Bhd (market cap of RM11.37 billion), Dutch Lady Milk Industries Bhd (market cap of RM2.81 billion), as well as breweries Heineken Malaysia Bhd (market cap of RM6.60 billion) and Carlsberg Brewery Malaysia Bhd (market cap of RM7.57 billion).

Valuations of both Top Glove and Hartalega have now become rather expensive, with trailing 12-month price-earnings ratios of 44.78 times and 61.15 times, respectively. Top Glove’s indicated dividend yield, meanwhile, is just about 1.12%, while Hartalega’s stands at 1.11%, following the recent rally in their share prices.

On March 30, Affin Hwang Capital Research said in a strategy note that the rubber glove industry was the research house’s only “overweight” recommendation, as it expects the sector to benefit from stronger demand arising from the Covid-19 outbreak, and a weaker ringgit against the US dollar.

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