Top Glove keen on M&A to up capacity

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KUALA LUMPUR: The world’s largest rubber glove producer in terms of output, Top Glove Corp Bhd, (fundamental: 2.5; valuation: 0.9) is eyeing to acquire other glove makers as well as related machinery and production firms to expand the scope of its business.

“Given the size of our current operations, we are keenly on the lookout for mergers and acquisitions (M&A) opportunities both in similar and related industries,” said Top Glove chairman Tan Sri Lim Wee Chai during the company’s briefing on its second quarter of ended Feb 28, 2015 (2QFY15) results yesterday. 

He said the group has yet to identify any M&A target but its preference, however, is local players.”Nevertheless, we are always on the lookout for any possible opportunity,” Lim said.

On how much Top Glove intends to spend on its M&A exercise, he said it is dependent on the size of the target company that it is going to acquire. 

But with the company’s current “strong” financial position, he hopes the group could seal one or two M&A activities this year.  The company’s net cash stood at RM142.8 million as at end-February this year. Its total assets were RM2.25 billion, while short-term borrowings were at RM329.8 million.

Lim noted that the company’s capacity will grow to 52.2 billion pieces per annum upon the full operation of its three new plants in Lukut and Klang, and Phuket in Thailand. 

“We will also focus on emerging markets like China and India aside of the United States, Germany, Japan and United Kingdom,” he added. Nevertheless, he acknowledged that the business environment may be challenging in view of the intensification of competition in the nitrile glove segment and implementation of the goods and services tax.

Top Glove’s net profit for 2QFY15 rose 35% to RM56.07 million or 9.09 sen per share from RM41.55 million or 6.7 sen per share on the back of higher sales volume. The weaker ringgit versus the US dollar also supported its revenue growth.

Revenue for the quarter was higher (4.37%) at RM572.25 million versus RM548.27 million a year ago. 

For the first half of FY15, Top Glove registered a higher net profit of RM104.75 million or 16.97 sen per share compared with RM91.83 million or 14.8 sen per share a year earlier. 

Revenue also expanded 1.79% to RM1.14 billion from RM1.12 billion. Shares in Top Glove closed seven sen or 1.36% higher at RM5.20, bringing its market capitalisation to RM3.21 billion. 

The Edge Research’s fundamental score reflects a company’s profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.


This article first appeared in The Edge Financial Daily, on March 19, 2015.