Monday, December 19, 2011

OSK Research maintains Neutral on Top Glove, FV RM4.52

KUALA LUMPUR (Dec 19): OSK Research is maintaining its Neutral outlook on Top Glove Corp Bhd.

The research house said on Monday that despite a number of near-term setbacks, it had increased its Fair Value for Top Glove to RM4.52 (from RM4.00 previously), based on the existing price-to-earnings ratio of 17 times as it rolled forward to FY13 earnings.

OSK Research said Top Glove's 1QFY12 results met its expectations, but fell short of those of consensus.

'Its 1QFY12 net profit was higher q-o-q, owing to the time lag in passing that quarter's lower latex costs to its customers. However, on a y-o-y comparison, its 1Q net profit was still lower in view of the weaker demand and hence, only about 70% of costs were being passed onto customers.

'Nevertheless, we believe the worst is over for Top Glove as it is expected to benefit from the decline in the price of natural rubber latex, which is used in about 80% of its product mix. Maintain NEUTRAL,' it said.

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