Swot Top Glove

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INITIATING COVERAGE 11 April 2007

Top Glove Corporation
Glove industry’s top dog

OUTPERFORM RM9.25
@10/04/07 Target: RM11.80 Industrial (Rubber Gloves)

TOPG MK / TPGC.KL

Sharifah Farah + 60 (3) 2084-9965 – sharifah.jamalullil@cimb.com

KKDN PP 14048/11/2007

• Global leader. Top Glove is clearly living up to its name. It is the world’s largest rubber glove manufacturer with an estimated global market share of 22%, which it targets to raise to 35% by 2010. • One-stop shop. The group aims to become a one-stop shop for gloves, a move that should help it to garner more market share. It already offers a wide range of products – from latex to synthetic gloves and from examination to industrial usage. Top Glove has 13 key products for both hospital and industrial use. • 25-40% annual expansion to drive earnings. Earnings will be fuelled by its capacity expansion of 25-40% p.a. in FY07-09. It plans a staggered expansion that will keep pace with market demand. Top Glove has a 3-pronged growth strategy – organic growth, growth via M&As and upstream diversification. • OUTPERFORM with target price of RM11.80. Top Glove is trading at a CY08 P/E of 17.2x, which is at a discount to its historical 1-year forward P/E of 22x. Tagging this average to its CY08 EPS, we get a target price of RM11.80, which implies share price upside of 27.6%, higher than the current market return of 12%. We begin coverage with an OUTPERFORM recommendation. The main re-rating catalyst is the improving quarterly earnings driven by its ongoing capacity expansion and M&A activities. Financial summary

FYE 31 Aug Revenue (RM m) EBITDA (RM m) EBITDA margins (%) Pretax profit (RM m) Net profit (RM m) EPS (sen) EPS growth (%) P/E (x) Gross DPS (sen) Dividend yield (%) P/NTA (x) ROE (%) Net gearing (%) Net cash per share (RM) P/CF (x) EV/EBITDA (x) CIMB/Consensus (x) Source: Company, CIMB/CIMB-GK estimates, Reuters Estimates

2005 641.8 89.0 13.9 65.7 53.4 28.5 +34% 32.4 8.0 0.9 8.8 29.4 63.4 (0.69) 24.0 19.7

2006 992.5 129.5 13.1 91.8 78.4 41.5 +45% 22.3 9.0 1.0 6.8 32.4 75.1 (1.12) 16.5 13.8

2007F 1,367.1 175.6 12.8 127.9 108.0 44.1 +6% 21.0 10.0 1.1 3.9 21.3 0.33 15.7 13.3 1.13

2008F 1,713.6 232.4 13.6 174.8 147.9 49.4 +12% 18.7 13.0 1.4 3.3 18.6 0.30 14.1 13.3 1.10

2009F 2,110.5 287.4 13.6 218.6 185.1 61.8 +25% 15.0 15.0 1.6 2.8 19.7 0.40 11.2 10.6 1.06

Price chart
11.0 10.0 9.0 8.0 7 7.0 0.4 6.0 5.0 Apr May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr 0.0 0.8 Volume 10 million (R.H. SCALE) TOP GLOVE CORPORATION BHD RELATIVE TO KLCI (R.H. SCALE) 1.6 1.2

Market capitalisation & share price info
Market cap 12-mth price range 3-mth avg daily volume # of shares (m) Est. free float (%) Conv. secs (m) RM2.7bn RM5.70/RM10.00 RM3.7m 299.6 32 None Share price perf. (%) Relative Absolute Major shareholders Dato' Sri Dr. Lim Wee-Chai Top Glove Holdings 1M (5.4) 3.9 3M (18.9) (4.8) 12M 14.6 58.9 % held 27.0 7.2

Source: Bloomberg

Source: Company, CIMB/CIMB-GK Research, Bloomberg

Please read carefully the important disclosures at the end of this publication.

MALAYSIA

CIMB Research Report

Background
Global market leader... Top Glove is clearly living up to its name. It is the world’s largest rubber glove manufacturer with an estimated global market share of 22% based on its existing capacity. …with overseas plants. Established in 1991, the group was listed on Bursa Malaysia’s second board a decade later and, within 14 months of listing, graduated to the main board in May 02. It has also diversified overseas and set up four factories in Thailand and two in China, in addition to the 12 facilities it has in Malaysia. Figure 1: Corporate structure

Top Glove Medical (Thailand) Great Glove (Thailand) TG Medical (USA) Inc Great Glove Sdn Bhd TOP GLOVE CORP Top Glove Sdn Bhd TG Medical Sdn Bhd Top Glove Engineering Top Glove International - M'sia Top Glove Technology - M'sia Top Glove (Zhangjiagang) Co. Ltd Great Glove (Xinghua)...
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