KUALA LUMPUR (June 10): Top Glove Corp Bhd, whose share price has more than tripled year to date, ascended to fresh peak at RM17.20 in early morning trade. But selling pressure started to surface soon after that, indicating investors are holding the horses ahead of its quarterly result announcement tomorrow.

At the noon break, Top Glove closed at RM16.86, down 14 sen or 0.9%. There were 7.39 million shares traded in the morning session. The stock was mostly been hovering in the negative territory in the morning session.

All eyes are on Top Glove's earnings figures for the third financial quarter ended May 31, 2020 (3QFY20), during which the Covid-19 virus was spreading globally. The World Health Organization declared the outbreak a pandemic in March.

CGS-CIMB Research expects Top Glove's net profit to more than double year-on-year and quarter-on-quarter, which is to be driven by higher sales volume and average selling prices (ASPs).

Still, the profit jump has yet to capture the full impact of the surge in glove demand caused by the pandemic. The stock brokerage anticipates stronger growth ahead.

"However, we believe that 3QFY20 did not capture the full impact of Covid-19 as it only began to hike ASPs aggressively from June 20. Hence, Top Glove should continue to record sequentially stronger results beyond 3QFY20," said CGS-CIMB in a note dated June 9.

"We continue to like Top Glove as the key beneficiary of the current favourable supply and demand dynamics in the glove sector due to Covid-19 given it is the largest glovemaker globally by capacity (78.7 billion pieces per annum currently)," it added.

CGS-CIMB pegs its target price at RM25 — the highest among investment analysts who track the company. Following the forecast, this means there is 48% headroom from the current level.

CGS-CIMB Research forecast Top Glove's net profit to soar to RM1.37 billion for the full financial year ending Aug 31, 2020 (FY20) and RM3.7 billion for FY21, with revenue at RM6.79 billion for FY20 and RM10.72 billion for FY21.

CGS-CIMB foresees Top Glove to continue seeing firm demand for gloves as the Covid-19 pandemic worsens, especially in countries with high population density and low glove consumption per capita, such as Brazil, Indonesia, Pakistan and others.

According to Bloomberg data, 19 out of the 22 research firms have "buy" calls, with six analysts having target prices of RM20 and over.

Other analysts that have target prices above RM20 are Credit Suisse's Joanna Cheah with RM23, followed by BIMB Securities Sdn Bhd's Saffa Amanina and Macquarie's Denise Soon with RM20.50 each, Kenanga Research's Raymond Choo with RM20.10 and Maybank Kim Eng's Lee Yen Ling — who was the first to upgrade her target price to RM20.

Maybank's Lee is expecting Top Glove's FY20 net profit to be at RM1.14 billion and RM3.17 billion for the following financial year, while revenue is projected to be at RM6.52 billion for FY20 and RM10.61 billion for FY21.