KUALA LUMPUR (April 23): MIDF Research is slightly positive on Top Glove Corp Bhd’s move to downsize its Hong Kong initial public offering (IPO), as it thinks that the smaller issuance will be less dilutive for existing shareholders.

Its analyst Ng Bei Shan said in a note, for comparison purposes, the dilutive impact to its earnings per share is now estimated at about 9% compared to about 15% previously.

“On the other hand, Top Glove will still be able to boost its corporate profile in the Greater China and international market through the listing in Hong Kong,” she added.

Top Glove announced yesterday that it has revised down its share issuance size for Hong Kong IPO to 793.5 million from 1.495 billion shares initially, to raise RM4.17 billion, down from RM7.7 billion initially.

Despite the revised fund size, Ng believes that Top Glove will be able to fund its other expansion requirements given its strong cash flow and its net cash of about RM4 billion.

She made no changes to Top Glove earnings estimates pending the completion of the exercise.

“Our theoretical ex-price will be adjusted to RM7.54 (compared to RM6.99 previously) if the over-allotment option is fully taken up for its dual-listing plan on Hong Kong Stock Exchange,” she said.

She reiterated her "buy" recommendation on Top Glove due to its attractive valuation at a price to earnings ratio of 4.3 times FY21 earnings and 12.8 times FY22 earnings.

“Dividend yields for FY21 and FY22 are 15.3% and 3.9% respectively,” she added, while her target price on Top Glove was unchanged at RM8.29.

At 11.03am, Top Glove rose nine sen or 1.6% to RM5.71, valuing the group at RM46.12 billion.