RESULTS UPDATE

Friday, October 12, 2018

FBMKLCI: 1,708.49
Sector: Healthcare

THIS REPORT IS STRICTLY FOR INTERNAL CIRCULATION ONLY*

TP: RM12.91 (+20.7%)

Top Glove Corporation Bhd EX: RM6.46
Last Traded: RM10.70
4Q18: Another Record Revenue Buy
Tan Kam Meng, CFA Tel: +603-2167 9605 kmtan@ta.com.my www.taonline.com.my

Review Share Information

Top Glove’s FY18 core net profit of RM452.4mn (+40.0% YoY) came in B loomberg Code TOP G MK
S tock Code 7113
within ours and consensus estimates at 99.4% and 98.1% of full-year Lis ting Ma in Ma rket
estimates respectively. S ha re Ca p (mn) 1278.2
Ma rket Ca p (R Mmn) 13,676.3

YoY, FY18 adjusted PBT grew by 43.4% to RM541.5mn, on the back of 52-wk Hi/Lo (R M) 12.48/5.62
12-mth Avg Da ily Vol ('000 s hrs ) 4,814.8
23.6% growth in revenue to RM4.2bn. The robust performance was E s tima ted F ree F loa t (% ) 43.2
mainly due to: i) sales volume growth of 26%, and ii) higher average selling B eta 0.3
Major Shareholders (% )
price (ASP) of 6%. We note that the utilisation rate was high at 90% in
Ta n S ri Da to S ri Lim Wee Cha i - 29.0
FY18. EBIT margin grew by 2.6p.p to 13.4% due to better efficiency. The E P F - 7.02
improvement in margin was also aided by prices of raw materials, which KWAP - 5.40
F irs twa y United Corp - 5.03
were lower on average- natural latex -21.7% YoY to RM4.51/kg and
nitrile latex +2.7% to USD1.13/kg. Forecas t Revis ion
FY19 FY20

QoQ, the group recorded another record revenue of RM1.2bn (+10.6%). F oreca s t R evis ion (% ) 0.0 0.0
Net profit (R Mmn) 534.4 560.8
Sales volumes grew 6% as demand for gloves remained strong. On Cons ens us 517.5 571.7
Aspion, we note that it contributed circa-4% of the group’s total net TA's / Cons ens us (% ) 103.3 98.1
profit in 4QFY18. P revious R a ting Buy (Ma inta ined)

Financial Indicators

Separately, the group announced a final dividend of 10.0sen/share. This
FY19 FY20
brings FY18’s total dividends to 17.0sen/share (FY17: 14.5sen/share), Net g ea ring (x) 0.5 0.4
representing a payout ratio of 50.0% (FY17:54.6%). P /CF P S (x) 16.5 19.3
R OAA (% ) 10.3 10.4
Impact R OAE (% ) 22.2 20.9
NTA/S ha re (R M) 1.1 1.3

No change in our earnings estimates pending analyst briefing on 17th
October. Scorecard
% of FY
vs . TA 99.4 Within
Outlook vs . Cons ens us 98.1 Within

In terms of capacity expansion, the group is expected to have additional
6.6bn gloves (10.9%) by end-19, adding on to the group’s current capacity Share Performance (% )
Price Change TOPG MK FBM KLCI
of 60.5bn gloves. Thereafter, expansion will come from factory F8A 1 mth 1.7 (4.3)
(3.2bn gloves) in Thailand, scheduled to be operational by early 2020. 3 mth 8.1 0.3
6 mth 5.9 (8.8)

On its court case with Mr. Low and Adventa, the next hearing will be 12 mth 80.4 (2.6)

from 29th October to 31st and 2nd November 2018. Note that Mr. Low (12-Mth) Share Price relative to the FBMKLCI
have been removed as a director of Top Glove in the recent EGM.

Valuation

TP maintained at RM12.91/share based on an unchanged PE of 30.0x
against CY19 EPS, maintain Buy.

Source: Bloomberg

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Table 1: FY18 Results Analysis

FYE Aug 31 (RM mn) 4QFY17 3QFY18 4QFY18 QoQ YoY FY17 FY18 YoY
R evenue 902.4 1,100.6 1,216.9 10.6 34.8 3,409.2 4,214.0 23.6
E B ITDA 125.1 192.1 215.5 12.2 72.3 479.6 708.9 47.8
Deprecia tion & Amortis a tion -29.8 -39.0 -43.1 10.7 45.0 -111.8 -146.0 30.6
E B IT 95.3 153.2 172.4 12.6 80.8 367.8 562.9 53.0
Net F ina nce cos ts 1.7 -8.7 -15.5 77.8 >-100 10.9 -23.1 >-100
S ha re of res ults of a s s ocia te -0.1 -0.5 -0.7 44.9 >-100 -1.0 1.7 >-100
EI 2.2 -9.8 -14.3 45.6 >-100 5.4 -18.8 >-100
P BT 99.1 134.2 142.0 5.8 43.3 383.1 522.7 36.4
Adj P BT 96.9 144.0 156.3 8.5 61.2 377.7 541.5 43.4
Ta x -5.1 -14.8 -40.0 >100 >100 -54.7 -85.4 56.2
MI 0.4 -1.8 -0.4 -78.6 >-100 0.1 -3.7 >-100
Net profit 94.5 117.6 101.6 -13.6 7.5 328.6 433.6 32.0
Core net profit 92.3 127.4 115.9 -9.0 25.6 323.2 452.4 40.0
EPS 7.5 9.4 7.9 -15.1 5.5 26.2 34.4 31.2
DP S 8.5 7.0 10.0 42.9 17.6 14.5 17.0 17.2

% % % % -pts % -pts % % % -pts

E B ITDA ma rg in 13.9 17.5 17.7 0.3 3.9 14.1 16.8 2.8
E B IT ma rg in 10.6 13.9 14.2 0.3 3.6 10.8 13.4 2.6
P B T ma rg in 11.0 12.2 11.7 -0.5 0.7 11.2 12.4 1.2
Adjus ted P B T ma rg in 10.7 13.1 12.8 -0.2 2.1 11.1 12.9 1.8
Ta x ra te 5.1 11.0 28.2 17.1 23.1 14.3 16.3 2.1
Core net profit (-MI) ma rg in 10.2 11.6 9.5 -2.1 -0.7 9.5 10.7 1.3

Table 2: Earnings Summary

FYE Aug 31 (RMmn) FY17 FY18 FY19F FY20F FY21F
R e ve n u e 3 ,4 0 9 .2 4 ,2 1 4 .0 5 ,2 67 .0 5 ,6 4 2 .7 5 ,8 6 5 .0
E B ITDA 4 7 9 .6 7 08 .9 8 1 0 .8 8 5 5 .0 8 80 .3
De p re cia tion & a m ortis a tion (1 1 1 .8 ) (1 4 6 .0 ) (1 6 8 .2 ) (1 7 4 .2 ) (1 7 6 .1 )
E B IT 3 6 7 .8 5 62 .9 6 4 2 .5 6 8 0 .8 7 04 .3
S h a re of a s s ocia te s (1 .0 ) 1 .7 0 .0 0 .0 0 .0
EI 5 .4 (1 8 .8 ) 0 .0 0 .0 0 .0
P BT 3 8 3 .1 5 22 .7 6 3 9 .3 6 7 9 .0 7 00 .7
Adj P B T 3 7 7 .7 5 41 .5 6 3 9 .3 6 7 9 .0 7 00 .7
Ta xa tion (5 4 .7 ) (8 5 .4 ) (1 0 2 .3 ) (1 1 5 .4 ) (1 1 9 .1 )
MI 0 .1 (3 .7 ) (2 .7 ) (2 .8 ) (2 .9 )
Ne t p rofit (-MI) 3 2 8 .6 4 33 .6 5 3 4 .4 5 6 0 .8 5 78 .7
Core n e t p rofit (-MI) 3 2 3 .2 4 52 .4 5 3 4 .4 5 6 0 .8 5 78 .7

EPS (s e n ) 2 6 .5 3 4.4 4 2 .3 4 4 .4 4 5 .8
E P S g rowth (% ) (8 .9 ) 2 9.8 2 3 .2 4 .9 3 .2
DP S (s e n ) 1 4 .5 1 7.0 1 7 .1 1 7 .9 1 8 .5
Divide n d yie ld (% ) 1 .4 1 .3 1 .6 1 .7 1 .7
PER (x) 4 0 .4 3 1.1 2 5 .3 2 4 .1 2 3 .3

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(TH I S P A GE IS IN TE N TI ON AL L Y L E F T B L AN K )

Stock Recommendation Guideline

BUY : Total return within the next 12 months exceeds required rate of return by 5%-point.
HOLD : Total return within the next 12 months exceeds required rate of return by between 0-5%-point.
SELL : Total return is lower than the required rate of return.
Not Rated: The company is not under coverage. The report is for information only.
Total Return is defined as expected share price appreciation plus gross dividend over the next 12 months. Gross dividend is excluded from total return
if dividend discount model valuation is used to avoid double counting.
Required Rate of Return of 7% is defined as the yield for one-year Malaysian government treasury plus assumed equity risk premium.

Disclaimer
The information in this report has been obtained from sources believed to be reliable. Its accuracy and/ or completeness is not guaranteed and opinions are subject to change without
notice. This report is for information only and not to be construed as a solicitation for contracts. We accept no liability for any direct or indirect loss arising from the use of this
document. We, our associates, directors, employees may have an interest in the securities and/or companies mentioned herein.

As of Friday, October 12, 2018, the analyst, Tan Kam Meng, who prepared this report, has interest in the following securities covered in this report:
(a) nil

Kaladher Govindan – Head of Research

TA SECURITIES HOLDINGS BERHAD (14948-M)

A Participating Organisation of Bursa Malaysia Securities Berhad
Menara TA One 22 Jalan P. Ramlee 50250 Kuala Lumpur Malaysia Tel: 603 – 2072 1277 Fax: 603 – 2032 5048
www.ta.com.my

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