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TOPGLOV (7113) TOP GLOVE CORP BHD 1QFY21 Result – Highest Profit Among KLSE Top 10 Companies!

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TOPGLOV (7113) 1QFY21 Result – Highest Profit Among KLSE Top 10 Companies!


On Wednesday 9/12/12, Top Glove Corporation Bhd had released its Quarter 1 of Financial Year End 20201 (1QFY21) quarter report. 

I only have one word after reading the report, which is Wow!

To keep things short, the Summary of the report is as follows:

  Q1 2021 Q1 2020 YOY



Q4 2020 QOQ



Revenue 4759253000 1209100000 294% 3109116000 53%
Profit Before Tax 3095525000 125452000 2367% 1623554000 91%
Profit After Tax 2375775000 111426000 2032% 1291995000 84%
EPS (Sen) 29.64 4.36 580% 15.95 86%
Operating Profit Margin 65% 12% 53% 52% 13%
Net Profit Margin 50% 9% 41% 42% 8%
Cash & cash equivalent 3888422000 274531000 1316% 2994933000 30%
  • The main reasons behind the exponential growth in every aspect of its business comparing with same quarter last year (1QFY20) and immediate preceding quarter (4QFY20) are due to the continuously increment of the average selling price (ASP) for its gloves. On top of that,  their sales order for glove and its factory production utilization are increasing as well. Although there was an increase in raw material prices during the period, it was minimal as compared to the increase in ASP and improved production cost efficiency.
  • Its amazing that the ASP and sales order for its gloves have been consistently increasing every month with no signs of slowing down still! This phenomenon has been going on since March this year.
  • When the cost of production for glove is fixed (in actual scenario it gets cheaper as you create more gloves your production cost efficiency improves due to economic of scale), whatever rate of increase in ASP for its gloves is pure profit before tax as there is no extra cost for selling its gloves at a higher price. This explains why Top Glove and other glove companies are enjoying huge profit margins right now.

Top Glove’s Press Conference

After releasing its quarter result, Top Glove subsequently held a press conference and the following are the takeaways from the press conference:

  1. According to the Chairman Tan Sri Lim, he regrets that the whole CBP issue has been dragging longer than expected. Currently they are at the end of the settlement and is very confident that this issue will be settled very soon.
  2. He mentioned that although China and Thailand are producing more gloves than before , it is estimated that the supply will still be insufficient to meet the increasing demand until the year 2023. (which also means that glove business will continue to be good until 2023)
  3. There will be 30% increase in ASP for its gloves as compared to this quarter due to the serious shortage of supply and increasing demandI believe this message is the highlight of the press conference. If this is true, the coming quarter result of Top Glove will be even more excellent.
  4. It was known that many glove distribution sites in the United States are distributing gloves at a worrisome pace as many of the sites are low on glove stock.
  5. Top Glove have in total 28 factories that are affected by Covid-19. Out of the 28 factories, 7 are back to normal operation (Phase 1), another 7 will be back to normal operation in this week (Phase 2), and the remaining factories will all be back to normal operation on next 2-3 weeks time (Phase 3&4).
  6. Lastly, the Chairman reaffirmed that the worldwide approval and usage of Vaccine for Covid-19 will not reduce the demand for gloves. Instead, it will increase the demand for gloves further as glove plays a really important role in the global PPE segment including the process of Vaccine injection.

From the press conference, we can tell that the Chairman and the Management of Top Glove are very confident in the future of the business. Based on the key points mentioned above, we can safely assume that at least for the next two quarters Top Glove’s quarter results will still be improving, no doubt in a big way!

My Opinion:

This quarter result has been fantastic and within expectation, it could be better if without the closure of its Covid-affected factories during the end of November. Whether this result meets the market’s expectation or not, it does not matter. I truly believe the best for Top Glove is yet to come.

Unfortunately, for the past few weeks Top Glove has been bombarded with numerous bad news like the CBP issue, Foreign Labor accommodation issue, multiple Vaccine approval news, and the glove over supply crap. Many believe the euphoria and trend for glove business are done. Hence its share price has been hammered down recently from the high of RM9.7 to around RM6.40 and since then the share price has been hovering around RM6.60 – RM7.20.

Amid all the bad news, the share price miraculously still standing strong above RM6.40, this means something isn’t it?

Fundamentally, the company business is still intact. In fact, the business is getting better based on the recent quarter results. Let me break it down a few points for you if you are still confuse:

  1. As you can see, Top Glove’s business is improving at a shocking rate every quarter. As a value investor, as long as business is still growing strong we shouldn’t be worry.
  2. ASP for glove is still increasing every month. According to Top Glove, next quarter we will see a 30% rate of increase in ASP as compared to this quarter. Higher ASP simply means higher profit margins. It is so rare nowadays to have companies that can have exponential profit margins growth every quarter like Top Glove.
  3. Ever since Covid19 been declared as a worldwide pandemic, the demand for gloves has been increasing everyday. I see no signs of slowing down in demand given that the Covid19 situation is still very serious in many countries especially the United States. We will continue to be short of glove supplies, at least until 2023. Even with all the new glove companies coming in, it takes at least 4-6 months for them to get the necessary licenses and their operation running.
  4. Based on a simple PER valuation, Top Glove is super undervalued at this price right now. Let me show you why:
Quarter EPS (sen)
Q4 2020 15.95
Q1 2021 29.64
*Estimate Q2 2021 *29.64
*Estimate Q3 2021 *29.64
Total 104.87 or (RM1.05)

Using the table above, assuming the upcoming next two quarters (Q2 2021 & Q3 2021) of Top Glove remain the same result, which means we are assuming there is no improvement in its Sales, Profits, no increase in ASP or whatsoever with everything remains the same as current quarter (which we know at this point of time is very highly unlikely) its total trailing EPS will be RM1.05 (sum of above 4 quarters EPS).

Historically, Top Glove’s PE multiple has always been on an average of 20 to 25. Using a PE of 20, and multiplying by its estimated EPS of RM1.05, we get the price of RM21, which translates to a potential gain of around 200% if you buy them at RM7.00!

Well, you could argue that the above calculations are too optimistic. Top Glove’s future PE multiple should be lesser since Glove might not be in demand anymore at post-pandemic. Fine, lets trim down the numbers further. By assuming Top Glove’s business is not as good as we expected and we discount its earning by 30%, this gives us a smaller EPS of RM0.735

As of 10/12/20, the closing price of Top Glove is RM6.99. For the easy of reading, I shall use RM7.00 instead.

Let me illustrate using a table:

*PE Ratio= Price / EPS. To get the valuation Price, simply use the PE multiply by its EPS (PE x EPS = Price)

EPS PE multiple Price* Potential Gain
RM0.735 25 RM18.38 163%
RM0.735 20 RM14.70 110%
RM0.735 15 RM11.03 57.6%
RM0.735 10 RM7.35 5.0%

By using a discounted EPS of RM0.735, a PE multiple of 10 gives Top Glove the price of RM7.35, still above the purchase price of RM7.00. To me, any price below RM7.00 is considered a safe zone with minimal downside risk.

For a consistently growing company like Top Glove, I have not seen its PE multiple to go less than 10 before. and REMEMBER, this calculation is based on the assumptions the next two quarter results are not improving, and we further discount its EPS by 30%.  If I were to use another scenario with growing EPS for the coming quarters, Top Glove will be even more undervalue right now.


Personally, I believe there is still great amount of upside potential for Top Glove in terms of its business. The market sentiment towards glove companies might not be bullish right now as people are worry that the approval of Vaccine will affect the demand and hence reduce the ASP of gloves. And many are just waiting on the sideline to monitor the progress of Vaccine and its actual impact on the glove business. If you are a long term value investor, there is really nothing to worry about.

Top Glove has declared an interim dividend of RM0.165 per share. Chairman, Tan Sri Lim has promised that the company will be giving dividend on a quarterly basis with a payout ratio of at least 50%, this will translate to a dividend yield of at least 9% p.a. based on the share price of RM7. Think about this, even if the share price of Top Glove stays around RM7 for a long time, you will still be enjoying a dividend yield of at least 9% p.a. , which is way more than any other investments. I believe sooner or later, big funds will eventually have their fund back into Top Glove as they usually have their own set of investing mandates which involve investing in high dividend yield stock or high growth stock.

Anyhow, before you make any decisions to buy, sell, or hold just ask yourself these few questions:

  1. Will Top Glove’s business continue to improve every quarter in future?
  2. Is the ASP for gloves increasing, stagnant, or dropping?
  3. Will global demand for glove globally drop and cause supply more than demand?
  4. Can you find another company that have better earning prospects than Top Glove?
  5. Can you find a better dividend yield company than Top Glove? Even the banks’ dividend payout are losing out.

If 3 out of 5 of your answers are yes, perhaps you can consider to invest other stock instead. For your information, Top Glove makes the highest quarterly profit among Malaysia’s top 10 companies during this quarter. Company of such caliber like Top Glove does not come easy.

I foresee another exponential growth for Top Glove in the next quarter.



This post is completely for education and discussion purpose only. The author of this post does not have the required licenses to provide any investment advice or induce any trade for the readers here.  Therefore, it should not to be taken as investment advice or inducement to trade and the Author take no responsibility for any gains or losses as a result of reading the contents herein. Please invest at your own risk.



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