STOCK FOCUS OF THE DAY
TopGlove Corp : 4QFY17 within expectations Hold
We maintain our earnings forecast, FV of RM6.22/share and HOLD call. Our valuation is based on an unchanged target PE of 20x on FY18F EPS. The group reported 4QFY17 revenue of RM902.4mil (QoQ: +3.8%, YoY: +25%). Eliminating forex and FV gain on hedging contracts, core net profit amounted to RM96.4mil (QoQ: +19.8%, YoY: +66.8%), bringing FY17 core earnings to RM327.3mil (YoY: -6.7%). This came in within both our and consensus’ expectations.
The group has proposed a final dividend of 8.5 sen/share, bringing total dividend payout in FY17 to 14.5 sen/share (same as FY16). This translates to a payout ratio of 54.6%. Going forward, Top Glove’s earnings is expected to be anchored by a capacity-led growth. We estimate revenue to grow by 15% in FY18, underpinned by a 13% increase in production volume. Factory 31 and Factory 32 are slated to commence operation by March 2018 and December 2018 respectively. Meanwhile, its condom manufacturing facility is expected to be operational in 2018.
We continue to like Top Glove for its carefully crafted expansion plan, focus on quality, and continual efforts in enhancing operating efficiency through increased automation. However, we believe the current share price has very much priced in Top Glove’s fundamentals.
QUICK TAKES
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ECONOMIC HIGHLIGHT
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US – Inflation fails to meet expectation, Fed to hike rates
NEWS HIGHLIGHTS
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