Review on Top Glove

 17 April 2021

Dear Fellow Investor,

This week I will review a recent purchase of Top Glove, the world’s largest producer of rubber gloves.

Below is a Bloomberg chart of insider buying and selling. At current price levels there is more green than red meaning company insiders, institutions, the EPF  and foreign funds are  overwhelmingly on the buy side.

Sentiment and news flow continues to be negative with some analysts downgrading the share. Some of the bad news includes a dilutive share issue proposal to list on the HKEX, progress on the Covid 19 rollout, slowing of rubber glove demand and the US CBP (customs and border protection agency) banning of rubber glove imports. If things are so bad why are insiders buying ?   Perhaps the bad news is already discounted ?

Below is an impact report produced by the International Labor Organization on 16 March 2021 and presented by Top Glove to address the concerns of the CBP.  Green signals all issues closed while the other colors show progress being made. The trend of progress is positive . Notice on the March 2021 inspection there were no red, orange or dark yellow indicators. Top Glove is cleaning up their act.

What supports Top Glove is their solid financials and low valuations. Current PE is 6.3.  Absolutely Stocks rates their financials at 2.7/3.0 while valuations are 2.1/3.0 .  Covid vaccines in much of the world are  rolling out much slower than  expected which will boost demand for gloves.  Other strains of Covid have been emerging which will also boost glove demand.  Based on current supply/ demand trends demand worldwide for rubber gloves exceeds supply by 33 % .

Below is latest  Bloomberg analyst summary which is generally positive.

The proposed listing on the HKEX is a possible headwind but on balance the odds favour upside.   

Take care,
Bill

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