KUALA LUMPUR (Sept 30): Top Glove Corp Bhd executive chairman Tan Sri Dr Lim Wee Chai has bought shares in the company for the first time in about three months last Thursday (Sept 23) when he acquired three million shares for RM2.6647 each after the rubber glove manufacturer’s share price closed down below RM3 on Sept 20 as investors weighed the glove industry’s outlook against Covid-19 vaccination progress.

Rubber glove has been a crucial personal protective equipment to fight the spread of the pandemic which began in early 2020. However, global Covid-19 vaccination progress has led to expectation of less demand for gloves in anticipation that the spread of the pandemic will be curbed.

Such Covid-19 vaccination sentiment has led to a drop in share prices of glove manufacturers including Top Glove as investors weighed the impact of falling average selling prices (ASPs) of gloves on these companies' financials.

According to Top Glove’s filing with Bursa Malaysia on Friday (Sept 24), Lim’s direct shareholding in Top Glove rose to 26.964% comprising 2.16 billion shares after he bought the three million shares last Thursday.

Lim also owned then an indirect stake of 8.495% comprising 680.19 million shares in Top Glove, the company’s filing showed.

Last Thursday's transaction was Lim’s first reported share buy in Top Glove in about three months since June 25 and June 30 when he bought one million shares each on those days, according to Top Glove’s Bursa filing on June 30.

For the June 25 transaction, the filing showed that Lim bought one million Top Glove shares at RM4.35 each while the one million shares acquired on June 30 were transacted at RM4.17 each.

After the June 30 transaction, Lim’s direct stake in Top Glove rose to 26.935% while his indirect stake stood at 8.498%, according to the filing.

Top Glove’s share price rose 12 sen or 4.3% to RM2.88 on Thursday, which values the group at about RM23.64 billion.

On Sept 20, 2021 (Monday), Top Glove’s share price dipped below RM3 for the first time in over a year when the stock closed down at RM2.81 from RM3.06 on Sept 17, 2021 (Friday).

Based on the chart for Top Glove’s share price which has been adjusted for its two-for-one bonus share issue, the last time Top Glove’s share price closed below RM3 was in May 2020.

On May 8, 2020, Top Glove’s share price ended at RM2.44.

On Thursday (Sept 30, 2021), Kenanga Investment Bank Bhd’s unit Kenanga Research analyst Raymond Choo Ping Khoon wrote in a note that the recent round of financial reporting season for glove makers suggested that the glove ASP trend is expected to soften faster than expected in subsequent quarters. 

Due to over-ordering over the past 15 months since the pandemic started, the market is currently undergoing a phase of inventory adjustment, Choo said.

"Taking the cue from Top Glove’s latest results briefing, we are now cutting our CY22 (calendar year 2022) ASP assumption to US$28-US$35/1,000 pieces,” said Choo, who has an "overweight" call on Malaysia’s glove sector which includes names like Hartalega Holdings Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd.

He said Kenanga Research maintained its "outperform" call on Top Glove shares with a target price of RM3.60.

MIDF Amanah Investment Bank Bhd’s research team wrote in a note on Thursday that the glove sector remains unattractive to investors. 

The glove sector, which had been a darling among investors in 2020, has seen a reversal in fortune in 2021, MIDF said.

"On a year-to-date basis, the [Bursa] Health Care index had fallen 30.9% and on a sequential quarter basis, it fell 14.5% [quarter-on-quarter]. We opine that this was probably due to changing dynamics in the sector. For one, we believe that spot rates and lower ASP suggest that urgent [glove] demand has peaked. 

"We have also observed new entrants in the market. On a separate note, there are concerns from ESG (environmental, social, and governance) issues which may have led to investors disfavouring the sector. 

"As a result, the sector became a weight to the local benchmark (FBM KLCI),” MIDF said.

Top Glove and Hartalega, which are constituents of the Health Care index, are also members of the KLCI.