FW: AmBank Research - Top Glove : Buoyant outlook ahead HOLD, 19 Oct 2017

 

 

STOCK FOCUS OF THE DAY         

Top Glove : Buoyant outlook ahead                                                                         HOLD

 

We raise our FY18-20F forecasts by about 3% each, increase our FV to RM6.36 (from RM6.22) and maintain our HOLD call. This follows the change in FY18F effective tax rate assumption from 18% to 15%. Our FV is based on 20x revised FY18F EPS.

 

Global glove demand is expected to remain healthy with an annual growth rate of 8%-10%. In FY18F, revenue is poised to grow by 15% on the back of a 13% increase in output volume. We estimate net profit margin to be relatively unchanged at 10% in FY18F. We believe effective tax rates would stay low at ~15% in FY18-20F. Management highlighted that even with the government’s withdrawal of the reinvestment allowance in 2019, the group will be able to sustain the low effective tax rate through the availability of R&D tax incentives, utilization of unutilized allowance and internal tax planning.

 

Management guided for RM300mil capex in FY18F (vs. FY17: RM447.1mil). The group aims to increase its market share from 25% to 30% by 2020. Besides organic growth, management reiterated its interest in M&As as an expansion means, and guided that there will be more M&As in next few months. 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.

 

 

Others :

Digi.Com : Stabilising service revenue                                                                     HOLD

Sapura Energy : Minimal impact from full ownership of Sapura3000          HOLD

Automobile : A slow month for all                                                                            NEUTRAL

 

                               

STOCKS ON RADAR

Tune Protect Group, Green Packet, Versatile Creative,Efficient E-Solutions

 

 

NEWS HIGHLIGHTS

Oil & Gas Sector : Petronas warns of stagnation in LNG industry

YSP Southeast Asia : Vietnam ops to break even

Property Sector : Station in Forest City not decided yet — MyHSR

 

 

 

DISCLAIMER:

The information and opinions in this report were prepared by AmInvestment Bank Bhd. The investments discussed or recommended in this report may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of AmInvestment Bank Bhd. Bhd may from time to time have a position in or with the securities mentioned herein. Members of the AmBank Group Bhd and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgment as of this date and are subject to change without notice.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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