Thursday, December 16, 2010

OSK Research downgrades Top Glove's earnings

KUALA LUMPUR: OSK Research said Top Glove Corp Bhd's 1QFY11 results were below expectations owing to normalising demand for examination gloves.

'As such, we are downgrading our FY11-12 earnings by 11%-22%. Going forward, we expect latex price to either pull back in 1QCY11, or continue to go up until April/May 2011 when the wintering season for rubber trees ends,' it said on Thursday, Dec 16.

The research house said it was maintaining a Neutral with a revised target price of RM5.74.

OSK Research said Top Glove's 1QFY11 results were below consensus and its expectations, making up 15% and 14% of the FY11 forecasts. The lower-than-expected results were mainly due to normalizing demand for examination gloves, which led to only about 70%-80% of the company's latex cost increase being passed on to its customers as there was a one to two-month time lag between latex price rise and the adjustment in selling prices.

'Also, its overall performance was affected by the weakening of the USD against MYR. These in combination caused its 1QFY11 net profit to drop by 20.0% q-o-q to RM36.1m. Finally, on a YTD comparison, its net profit was also lower by 44.7% due to the same factors,' it said.

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