Top Glove’s 4th Q. profit is 5 times its 3rd Q. profit?

Koon Yew Yin 4 Aug 2020

Affin Hwang Capital Research analyst, Mr Ng Chi Hoong recently pondered the possibility that Top Glove’s share price could breach Rm 100.

Many investors do not believe it. That is why its share price is not shooting up like other smaller glove stocks such as Comfort, Supermax, CarePlus etc. 

The CEO of Comfort said at its AGM that he was increasing 5-10 percent of the selling price of gloves every month. Since Top Glove is the biggest glove manufacturer in the world, it should be able to increase its selling price by at 10 percent every month.  

In the 3^rd quarter ending May, its revenue Rm 1,688 million – PBT 422 million = Rm 1,266 million production cost. 

Assuming 10% selling price increase its revenue for June was Rm 1,688 X 1.10 = Rm 1.857 million – production cost Rm 1,266 = PBT Rm 591 million.

Assuming 10% selling price increase its revenue for July was Rm 1,857 X 1.1 = Rm 2043 million – production cost Rm 1,266 = PBT Rm 777 million. 

Assuming 10% selling price increase its revenue for Aug will be Rm 2043 X 1.1 = Rm 2247 million – production cost Rm 1,266 = PBT m 981 million. 

Total PBT for 4^th quarter Rm 2,349 million. Assuming 25% tax PAT Rm 1,762 million 

Total issued 2.7 billion shares 

EPS for the 4^th quarter Rm 1,762 million divided by 2.7 billion = 65 sen 

Its EPS for 3^rd quarter was 13.59 sen 

Profit increase by 65 sen divided by 13.59 sen = 4.78 times.    

Mr Ooi Teik Bee has kindly checked and verified my calculation. That is why I posted my previous article namely “Top Glove is very much under-priced”. 

Based on my calculation for its 4^th quarter, all investors should be able to foresee Top Glove’s profit for the next financial year. 

Now I believe Affin Hwang Capital Research analyst Mr Ng Chi Hoong’s Rm 100 as Top Glove’s target price.