KUALA LUMPUR, March 21 (Bernama) -- Bursa Malaysia’s benchmark index ended the day marginally higher supported by renewed buying interest in blue-chip stocks, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) gained 1.29 points to 1,505.45 from Thursday’s close of 1,504.16. The benchmark index opened 0.29 of-a-point lower at 1,503.87 and moved between 1,503.71 and 1,513.23 throughout the day. On the broader market, losers outpaced gainers 513 to 371 while 428 counters were unchanged, 1,125 untraded, and 29 suspended. Turnover rose to 3.43 billion units worth RM4.28 billion from 3.27 billion units worth RM2.64 billion on Thursday. UOB Kay Hian Wealth Advisors Sdn Bhd head of investment research Mohd Sedek Jantan said buying interest was seen particularly within defensive sectors such as utilities, healthcare, and banking during the morning session.
Neutral Outlook: Research houses, including MIDF Amanah Investment Bank Bhd (MIDF), CIMB Investment Bank Bhd (CIMB), and Hong Leong Investment Bank Bhd (HLIB), have maintained a neutral stance on Top Glove due to ongoing challenges in the market. Their target prices have been revised downwards:
- MIDF Research: Target price of 83 sen (from RM1.24)
- CIMB Securities: Target price of 95 sen (from RM1.40)
- HLIB: Target price of 91 sen (from RM1.01)
Earnings Volatility: Despite efforts to diversify revenue and manage costs, Top Glove continues to face earnings volatility. Key challenges include:
- Margin compression: Continuing as a major concern.
- Supply chain disruptions: Especially from China, adding to competitive pressures.
Q2 FY25 Performance:
- Surprise Turnaround: A core profit of RM58.1 million in 2QFY25, driven by:
- Improved average selling prices (ASPs)
- Higher sales order volumes
- Better utilisation rates
- This led to an 18.5-percentage-point margin expansion to 6.4%.
Earnings Forecast Adjustments:
- FY25-27 estimates have been significantly lowered:
- FY25: RM107.6 million (down 22%)
- FY26: RM125.4 million (down 46%)
- FY27: RM134.8 million (down 65%)
Challenges and Risks:
- Competition from Chinese manufacturers: Particularly in non-US markets, intensifying competition.
- Demand Impact: A slowdown in 3QFY25 is expected due to reduced glove demand following frontloading activities by US buyers ahead of tariffs on Chinese imports, effective from January 2025.
- Weaker-than-Expected Sales: For HLIB, weaker-than-expected sales volume and subdued European orders contributed to a net loss in 1HFY25.
Potential Recovery: Despite challenges, HLIB anticipates a gradual recovery in the latter half of FY25, supported by a better demand-supply balance in the global glove market.
Conclusion:
Top Glove continues to face pressure from fluctuating ASPs, strong competition, and demand volatility. While there are signs of recovery, analysts remain cautious, adjusting their earnings forecasts significantly for FY25-27. Investors are advised to monitor these dynamics closely as the company navigates the challenges in the coming months.
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