Top Glove Q1 preview: What should investors know?

Here are three things to note ahead of Malaysian glove manufacturer’s Q1 financial report.

Malaysian glove manufacturer Top Glove Corporation will be releasing its results for the first quarter of fiscal 2021 on Wednesday (09 December 2020).

Below, we highlight three key stock fundamentals that investors should consider ahead of the company’s earnings report.

Top Glove stock is down 30% since October 2020

Top Glove’s shares have plunged roughly 30% since mid-October 2020, amidst reports that thousands of factory workers have tested positive for Covid-19.

The Malaysian government then ordered 28 of Top Glove’s factories in Klang, Selangor, to be shut down in stages. The closures production halt has put a strain on order deliveries

As at 12:10 SGT on Tuesday (08 December 2020), Top Glove’s Bursa Malaysia (KLSE: TOPGLOV) stock - tracked by IG's Malaysia 30 index - is trading at 6.89 ringgit (S$2.26) per share.

Meanwhile, the company’s Singapore Exchange shares (SGX: BVA) are trading at S$2.26 each.

Earlier this month, CIMB’s equity research team reiterated an ‘add’ call on Top Glove’s Malaysian stock with a target price of 10 ringgit (S$3.28).

Public Bank rated it a ‘buy’ alongside a 12-month target price of 9.70 ringgit (S$3.19).

Top Glove posted record earnings in 2020

Top Glove saw sales revenue hit 3.11 billion Malaysian ringgit (S$1.02 billion) for the quarter ended 31 August 2020, representing a year-on-year increase of 162%.

The improved performance came on the back of higher global demand for gloves during the Covid-19 pandemic, the company had stated in a press release.

Profit After Tax came in at 1.33 billion ringgit (S$439 million), 18 times higher than that registered in the corresponding period a year ago.

For the full 2020 financial year, sales revenue amounted to a new record of 7.24 billion ringgit (S$2.39 billion), up 51% from that of FY2019, while Profit After Tax also soared to 1.9 billion ringgit (S$626 million), a spike of 417% from the previous financial year.

Top Glove raised 2020 dividend sum by 373%

In light of the strong performance in Q4, the company’s board then recommended a final dividend of 0.085 ringgit (S$0.28) per share. This equated to a cumulative payout of approximately 691.8 million ringgit (S$228 million) for the fourth quarter.

Total dividends per share across the whole of fiscal 2020 came to 0.118 ringgit per share (S$0.039), which amounted to a total payout of approximately 961.2 million ringgit (S$317 million) for the full year.

The FY2020 dividend amount represented a 373% increase from FY2019’s sum, which equated to a net profit payout ratio of 51%.

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