Top Glove’s outlook remains robust

KOTA KINABALU: Top Glove Corporation Bhd’s (Top Glove) prospects are still viewed positively by analysts despite the slight hiccup seen in the performance of its recently acquired Aspion.

In a report, the research arm of Affin Hwang Investment Bank Bhd (Affin Hwang) opined: “We are maintaining our positive view on Top Glove post our recent meeting with management, as we believe that investors will look past the weak performance of Aspion, given that the profit shortfall will be compensated by the vendor.”

It further highlighted that catalyst for the stock would likely be the performance of its existing operation, which is benefiting from the current robust demand arising from developing countries.

It noted that while the profit guarantee from recently acquired Aspion is a net profit of RM80.9 million and RM108.3 million for the estimated financial year 2018 (FY18E) and FY19E (October year-end) respectively, Aspion still needs time to achieve these targets.

It said, “Given that the profit from Aspion was merely RM7 million in the recent quarter, management has guided that they will need at least another year or so before they are able to achieve those target results.

“Based on our understanding, the profit guarantee is derived mainly based on a higher sales volume (utilisation rate) without factoring in any cost synergies across both entities, and earnings growth could still surprise us on the upside.