KUALA LUMPUR (June 8): Top Glove Corporation Bhd had spent RM1.42 billion on buying back its shares over a five-month period until February 2021, but currently these shares are valued at only RM236.2 million.

This comes as the stock was badly battered and dived to its lowest since December 2017.
   
The world’s largest glove manufacturer spent the RM1.42 billion repurchasing 200.17 million of its shares. Based on the closing price of RM1.18 on Wednesday (June 8), the shares are worth RM236.2 million, a difference of RM1.19 billion.

It should be noted that Top Glove has said previously that it did not have to book any paper loss from the buyback activity, as the exercise is not deemed as an investment.

The group has also referred to paragraphs 33 and 34 of MFRS (Malaysian Financial Reporting Standards) which state that treasury shares are not an investment, but rather an equity which is captured at acquisition costs.

“No subsequent remeasurement is required as these are equity instruments, hence they would not be impaired at any point in time and the question of ‘paper loss’ does not arise,” it stressed.

Top Glove started buying back its shares shortly after its share price was adjusted to RM8.37 on Sept 3, 2020 from RM26.08 on the previous day to reflect the group's two-for-one bonus issue.  The group’s issued share capital was enlarged to 8.13 billion shares from 2.71 billion shares after the bonus issue.

The shares were bought at between RM5.78 and RM8.01, with the bulk of the shares purchased between Nov 10 and Nov 27, 2020.

Meanwhile, Top Glove is set to release its financial results for the third quarter ended May 31, 2022 (3QFY22) on Thursday (June 9).

According to Bloomberg data, the earnings consensus for Top Glove for the full financial year (FY22) is RM526.4 million, sharply lower than the RM7.87 billion recorded by the group for FY21 and RM1.75 billion for FY20 — when the glove demand was at its peak and propelled the glove average selling price upwards due to the Covid-19 pandemic.

Top Glove would need to achieve an average of RM126.57 million in earnings per quarter in 3QFY22 and 4QFY22 to meet market expectations. This translates into an average earnings growth of 45% from 2QFY22.

Top Glove's net profit for 2QFY22 dropped 52.86% to RM87.55 million from RM185.72 million in 1QFY22, while revenue decreased 8.51% to RM1.45 billion from RM1.58 billion as average selling prices normalised closer to pre-pandemic levels, which offset an uptick in sales volume.

On a year-on-year basis, the 2QFY22 net profit was down 96.95% compared with RM2.87 billion in 2QFY21. Revenue also tumbled 72.99% from RM5.37 billion.

Among the analysts covering the stock tracked by Bloomberg, 13 brokers have issued "sell" calls for the stock, nine are recommending “hold”, while one is maintaining a “buy” call.

The consensus target price is RM1.47, representing an upside of 24.58% against Wednesday's closing price of RM1.18.

Year to date, Top Glove shares have declined 51% from RM2.39 on Jan 3.