Why did Top Glove surge 34% in three days?

The glove manufacturer’s share price received a major boost after three rounds of share buyback amounting to 200 million ringgit.

  • Top Glove's Malaysia and Singapore shares is up over 30% since 11 September 2020
  • The rally came on the back of a 200 million ringgit share buyback
  • Maybank and CIMB analysts have maintained share price upsides
  • Macquarie Research, however, lowered target price by 46%

Why did the Top Glove stock jump up 34%?

Malaysian glove manufacturer Top Glove Corporation’s share price is up as much as 34% since it repurchased nearly 30 million shares last week.

The company reportedly spent nearly 200 million ringgit (S$65.8 million) to buy back shares priced between 6.12 ringgit (S$2) and 8 ringgit (S$2.60) over three days (09 September 2020 – 11 September 2020).

As at 16:45 SGT on Tuesday 15 September, Top Glove’s Bursa Malaysia (KLSE: TOPGLOV) stock - tracked by IG's Malaysia 30 index - is trading at 8.48 ringgit (S$2.80) per share.

Meanwhile, Top Glove’s Singapore shares (SGX: BVA) are trading at S$2.77 each on the IG platform – roughly 31% above last Friday’s opening mark.

Top Glove share price forecast: What's the latest?

The Top Glove Bursa Malaysia stock currently has a majority rating of ‘buy from 16 out of 22 analysts polled by Bloomberg.

The analysts have also given the stock an average 12-month target price of 9.14 ringgit (S$3). This represents a stock return potential of 8.7% from the last traded price.

Maybank reiterated its previous target price of 9.53 ringgit (S$3.14) on 14 September 2020 alongside a ‘buy rating.

Maybank also named Top Glove its ‘top pick’, on the basis that there is still a further 30% to 50% upside for the company’s average selling place of its medical grade nitrile gloves, which continues to experience high demand amid the Covid-19 pandemic.

On the dividend front, the analysts noted that while they do not expect a special dividend for fiscal 2020, there is a possibility of a special dividend in 2021 given the expected ‘supernormal earnings’.

CIMB analysts also maintained an ‘overweight’ call on Top Glove’s Malaysia stock and a target price of 9.20 ringgit (S$3.03).

While they expect the company to remain a key beneficiary of the global glove demand, they did note that glove stocks have been under selling pressure in recent weeks due to positive Covid-19 vaccine developments.

Nevertheless, they believe that glove demand is ‘unlikely to taper off even with a vaccine, as glove use will in fact increase when masses rush to be vaccinated’.

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Top Glove earnings: The bear case

On the other hand, Macquarie Research downgraded its Top Glove rating to ‘underperform’ and target price by 46% to 5.45 ringgit (S$1.80) from 10.13 ringgit (S$3.35) on 09 September.

Brokers cited a potential earnings peak in 2021 for their price case, adding that the company's strong performance is unlikely to repeat once demand-supply normalises when a vaccine is found.

Another point worth noting for investors is that Ebos, the largest medical and personal protective equipment supplier in New Zealand, has reportedly stopped importing a brand of glove made by Top Glove, after the latter was accused of using forced migrant labour in its factories.

In July, the US also banned imports from two Top Glove subsidiaries because of alleged inhumane working conditions for migrant workers in their factories.

It remains to be seen if this latest development will have any impact on imports to other markets and overall sales in the coming months. For now, analysts continue to see strong demand for Top Glove products in the coming quarters.

How to trade Malaysia stocks with IG

Are you feeling bullish or bearish on the FTSE Bursa Malaysia KLCI?

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:

  1. Create a live or demo IG Trading Account, or log in to your existing account
  2. Enter <Malaysia 30> in the search bar and select the instrument
  3. Choose your position size
  4. Click on ‘buy’ or ‘sell’ in the deal ticket
  5. 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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