Top Glove in M&A talks for expansion

by **Cals** Mon 05 Oct 2015, 01:29

Top Glove in M&A talks for expansion

By Chen Shaua Fui / The Edge Financial Daily | October 2, 2015 : 12:26 PM MYT

KLANG: Top [size=16]Glove Corp Bhd ([You must be registered and logged in to see this image.] Valuation: 1.10, Fundamental: 2.50), which is sitting on a RM200 million cash pile, is currently in talks with three to four glove manufacturers for possible merger and acquisition (M&A) exercises that could materialise within a year.

Top Glove chairman Tan Sri Lim Wee Chai noted that the world’s biggest rubber glove maker is on the prowl for M&A targets to sustain future growth.

With a big war chest, Lim said Top Glove would grab any opportunity to acquire companies related to glove making.

"We are talking to three to four companies, both locally and in the region. Hopefully within a year, we would have some good news. We have to acquire at least one to two companies a year for the company to continue to grow," Lim told a press conference after the grand opening of Top Glove Tower yesterday.

Lim said the group had benefitted from the strong US dollar and lower prices of raw materials, resulting in stellar third quarter earnings.

For the third quarter ended May 31, the group registered a net profit of RM72.27 million, a surge of 70.6% from RM42.37 last year. Revenue grew 15.2% to RM661.19 million from RM574.00 million a year ago.

Lim said Top Glove cut selling prices three times by giving discounts between 3% and 5% in the past three months to pass on cost savings to its customers.

As for the outlook for commodity prices such as natural rubber, Lim said that currently the latex concentration is traded between RM4 and RM5 per kg, which he said is reasonable.

He said the current price can be maintained for the next two to three years. Lim noted the latex concentration was previously traded at a high of RM11 per kg.

Although Top Glove gained from the stronger US dollar, Lim said depreciation of the ringgit is not a good thing for the country.

"We are better off because we earn in US dollars, but we are among the 5% of companies that are benefitting from the stronger greenback," Lim said.

While focusing on its core glove business, Lim said the group is now diversifying into the property sector as evident by Top Glove Tower.

Lim said the 23-storey tower with a gross built-up of 640,000 sq ft has a net lettable area of 300,000 sq ft, including office area (250,000 sq ft) and retail area (50,000 sq ft).

Currently, 40% of the total lettable area has been taken up. Another 40% is currently in the process of being rented out, with the remaining 20% available for leasing, he added.

Currently, the group has 27 factories and close to 500 production lines to manufacture five billion pieces of gloves per year. This includes a new factory in Klang, which is targetted to be completed in December 2016, which will add 28 lines to the group.

Top Glove’s share price has fared well so far this year. The stock has climbed from RM4.50 to an all-time high of RM8.50. It has gained 76.3% year to date to close at RM7.97 yesterday.
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