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Where next for Top Glove’s Malaysia share price after soaring 32% in 3 days?

Analysts say Malaysia glove maker Top Glove’s share price is poised for more gains in the coming months, despite having skyrocketed 400% this year.

Top Glove share price: what’s the latest story?

Malaysian glove manufacturer Top Glove Corporation's share price remains in bullish territory on Tuesday 21 July 2020, three days into the company's latest price rally.

As at 15:00 SGT on Tuesday, the stock – listed on both the Singapore Exchange and Bursa Malaysia, is trading at S$8.24 per Singapore share. It is also currently among IG’s top ten most traded stocks.

IG’s market analysis show that ‘buys’ form 77% of all trades on the Top Glove counter today. Across the week, ‘buys’ also dominate trades at 54%.

In terms of client outlook, 94% of IG client accounts with open positions in this market expect the price to rise, with the remaining 6% anticipating a price decline.

Meanwhile, its Malaysia shares - tracked by IG's Malaysia 30 Index - are trading at 24.36 ringgit each.

What caused Top Glove’s recent massive share price surge?

Top Glove’s current share price rally began last Friday 17 July, as the company rebounded from reports a day earlier that two of its subsidiaries were placed under a detention order by US Customs and Border Protection (US CBP).

This means that any disposable gloves distributed by the two entities cannot be sold in the US – which form 25% of Top Gloves’ total sales and orders. However, investor and analyst rumblings about a potential resolution was able to quickly put those concerns to bed.

This allowed Top Gloves’ Singapore and Malaysia stocks to finish the week 16% and 17% higher respectively.

On Monday 20 July, Top Glove’s share price received another boost after it announced the issuance of up to 5,476,974,322 (5.48 billion) bonus ordinary shares to existing shareholders.

The proposed bonus issue will be undertaken on the basis of two bonus shares for one existing new ordinary share, according to a Bursa Malaysia filing.

Following the announcement, Top Glove’s Singapore shares rose nearly 9% to hit a new all-time high of S$8.54, based on IG data.

IG’s industry-leading CFD trading platform allows you to buy long and sell short Top Glove shares without having to trade the actual asset. Start today by opening a live or demo IG account.

The world’s largest glove manufacturer has been one of the top Southeast Asian equity stories this year, as its market capitalisation has skyrocketed over 400% since the start of the year.

The company has been a rare beneficiary of the Covid-19 pandemic, with its disposable rubber gloves in hot demand among both medical and non-medical sectors.

Analysts raise Top Glove average share price target to 33.13 ringgit

Top Glove’s Malaysia shares currently have an average price target of 33.13 Malaysian ringgit per share, based on the eight newest analyst reports and ratings. This equates to a 34.6% upside from the last traded price of 24.60 ringgit.

Public Bank analysts on 21 July reiterated a ‘buy’ rating on the stock, while raising their price targets to 26.70 ringgit. They also increased their price-to-earnings ratio for the stock to 33x (at a +1 standard deviation of its five-year historical mean).

The analysts stated that the bonus issue ‘did not come as a surprise’ as this is ‘seen as a form of reward to existing shareholders’, considering Top Glove’s share price performance this year.

On the point of the US CBP ban, they noted that Top Glove has been requested to perform an audit before the ban can be lifted. ‘We think that Top Glove will likely pass the audit, considering that the group has successfully completed close to 80 audits in CY19,’ they wrote.

Meanwhile, RHB analysts also maintained a ‘buy’ call on Top Glove, alongside a higher target price of 33.30 ringgit per share, up from 28.88 ringgit previously. This represents an over 30% upside and estimated 1% annual yield.

The researchers wrote that they are positive on the stock as they believe the company’s average selling price (ASP) has increased further, with the demand-supply imbalance of gloves still prevalent amid the ongoing Covid-19 pandemic.

‘As a result, we have raised our FY20-22 earnings estimates by 17-68% after raising our ASP estimate,’ they added.

However, an ‘effective’ Covid-19 vaccine that will be made available globally ‘sooner than expected’, as well as a longer-than-expected resolution of the US CBP detention order, are two potential risks of Top Glove’s continued share price performance in the coming months.

How to trade Top Glove shares with IG

Are you feeling bullish or bearish on Top Glove’s share price? Either way you can buy (long) or sell (short) the asset using derivatives like CFDs offered on IG's industry-leading trading platform in a few easy steps:

  • Create a live or demo IG Trading Account, or log in to your existing account
  • Enter <Top Glove Corporation Bhd.> in the search bar and select the instrument
  • Choose your position size
  • Click on ‘buy’ or ‘sell’ in the deal ticket
  • Confirm the trade

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

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