KUALA LUMPUR: The short-to-medium-term prospects for Aspion due to irregularities and the impending legal case could prove a temporary setback for Top Glove Corp Bhd (TOPGLOV, 7113), with the profit guarantees at risk.
Kenanga research said in its Tuesday report that is is feeling less optimistic about the glove maker while noting that the production of vinyl gloves in China resumed and normalised in early 2018.
"Hence, over the past six months, delivery lead time (the time frame between order and delivery) has shortened
from 60-70 days to 30-45 days; signs that the earlier strong demand is tapering off."
In its recent earnings announcement, Top Glove's 1Q19 profit after tax and minority interests (PATAMI) of RM110.1mil came in within the research house's and consensus forecasts.
Kenanga said the group's revenue for 34.5% to a record high of RM1.26bil due to higher sales volume and average selling price following strong demand growth from developing and emerging markets from Asia, Eastern Europe and Latin America.
"1Q19 PBT margin was crimped by 1.8ppt to 11.2% compared to 13.0% in 1Q18 due to higher interest cost from the funding for M&As and organic expansion which resulted in a lower PBT margin for this quarter.
"As a result, 1Q19 PATAMI was higher by 4.4% to RM110.1m due to higher effective tax rate of 21.3% compared to 13.2% in 1Q18.
"The effective tax rate was higher due to a deferred tax liabilities provision of RM5.7m in the current quarter, as compared with the previous year, where deferred tax liabilities were only provided for in 4Q18."
Kenanga maintained its underperform rating on the counter with an unchanged target price of RM4.45
https://www.thestar.com.my/business/business-news/2018/12/18/kenanga-maintains-underperform-on-top-glove-tp-unchanged-at-rm4pt45/
