'Low latex, nitrile prices to benefit Top Glove'

The average prices of latex and nitrile, which are forecast to trend lower in the fourth quarter, are expected to have a
positive impact to the bottom line of Top Glove Corp Bhd.

MIDF
Research said Top Glove's revenue for the nine months ended May 31,
2012, grew 12.9 per cent year-on-year to RM1.7 billion, due to
improvement in sales volume on the back of higher demand for gloves
from both the developed and emerging markets.

"The economic
slowdown in China is anticipated to affect the demand from downstream
tyre makers," it said in a research note today.

MIDF said the
price of crude oil, which is the main raw material for nitrile, has
been trending down, as its demand prospects appear to have been
affected by the ongoing eurozone debt crisis and the uncertainty it
creates throughout the global economy.

"Based on the highly
positive outlook, we are upgrading our recommendation to a "buy" on a
revised target price of RM5.20, based on its five-year historical
average price earning multiple of 17 times," it added.

Another
research firm, JF Apex Securities Bhd, said Top Glove is well poised
for recovery, after another consistent performance this quarter.

"The
higher sales volume was the reason behind the impressive results, as
both developed and emerging markets posted strong demand for gloves,"
it said in a separate note today.

JF Apex has upgraded its
recommendation for Top Glove to "buy" from "hold" as it deems the
weakened global demand for rubber to most benefit Top Glove, the
world's largest rubber glove manufacturer.

Meanwhile, HwangDBS
Vickers Research Sdn Bhd has maintained a "hold" call on Top Glove due
to its wage cost rising by 30 per cent after the RM900 minimum monthly
wage is implemented on Jan 13, 2013.

"Hence, Top Glove is
pumping in up to RM50 million capital expenditure to increase
automation of processes at it factories, which would need 100 workers
less per factory.

"It would contain the increase in the wage
bill to 10 per cent, which we expect to be passed on to customers," it
said in separate research note today. -- Bernama