Monday 27 May 2024
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KUALA LUMPUR (July 23): Top Glove Corp Bhd is now second only to Malayan Banking Bhd (Maybank) in terms of market capitalisation (cap).

At today's close, the country's largest banking group has a market cap of RM88.58 billion.

At its market cap of RM70.45 billion, Top Glove has surpassed Public Bank Bhd (valued at RM69.57 billion) and Tenaga Nasional Bhd (RM64.69 billion) by a margin of RM1 billion.

Top Glove was again the top gainer on Bursa Malaysia today, closing RM1.42 or 5.75% higher at its record high of RM26.12.

Despite logging a 455% gain year-to-date, the bullish sentiment among analysts covering Top Glove remains unfettered.

Of the gloves' bull, Affin Hwang Capital Research analyst Ng Chi Hoong earlier this week raised his target price for Top Glove from RM22.40 to RM46.40, hinging on a price-earnings ratio (PER) of 30 times on forecast earnings.

Notably, if Top Glove's shares reach RM46.40 apiece, this would mean that its market cap will reach RM125 billion, surpassing that of Maybank by a comfortable 40% margin.

Ng even thinks investors may ascribe a higher valuation due to its strong earnings growth outlook and ponders the possibility of Top Glove breaching RM100 per share should investors peg a PER of 52 times to it, similar to Hartalega's valuation.

If Top Glove were to trade at RM100 apiece, this would mean its market cap will reach a whopping RM269 billion. In fact, there has not been any Malaysian-listed company reaching the RM150 billion mark.

Ng's optimism is premised on a high possibility that Top Glove's average selling price (ASP) could be higher than his base case of 5% month-on-month increment, given the strong surge in glove demand.

"If selling prices were to increase by 8-10% month-on-month each month in FY21E, our earnings forecasts would be uplifted between 24%-42%," he said, adding that Top Glove could see direct earnings improvement due to operating leverage as cost does not increase in tandem with increase in ASP.

In terms of the tampering from US Customs and Border Protection detention order, Ng thinks the impact on Top Glove's earnings is manageable at around 5% to 6%.

Ng also believes that should any unfavourable circumstances transpire, Top Glove could reroute its orders for the US to other countries at spot prices, and that could in fact pose better margin for the glove maker as spot prices are generally higher by about 5%.

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