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What Investors Should Know About Top Glove’s Priorities And Outlook For 2018, And Beyond

The Malaysia-based Top Glove (SGX: BVA)(KLSE:7113.KL) is the largest gloves maker in the world with a market share of about 25%. The company, which has a primary listing on Malaysia’s stock market, Bursa Malaysia, was dual-listed here in Singapore in June 2016.

The company recently published its annual report for its fiscal year ended 31 August 2017 (FY17). I have been reading the report to understand Top Glove’s business performance in FY17, and also its plans for the future.

In a previous article, I looked at how Top Glove’s business had done in FY17. In this article, I want to focus on the company’s plans for FY18, and beyond.

Let’s start with the company’s outlook for the gloves market that’s given in the latest annual report (emphasis is mine):

Prospects for our industry remain promising as gloves are an essential item to the healthcare sector, with demand projected to grow at approximately 8% annually. While the year ahead will invariably bring challenges, particularly cost increases, we believe we are well-prepared for them with our ongoing improvement initiatives aimed at reducing cost and wastage, and quality enhancement.”

From the quote above, we can see that Top Glove expects demand in the gloves industry to continue to grow at 8% annually. This should benefit glove manufacturers.

So what are Top Glove’s priorities going forward? This is what the company said (emphases are mine):

“Our immediate goal is to increase our 25% global market share for rubber gloves to 30% by the year 2020. With over 2,000 customers across 195 countries, we are well on our way to capturing growth potential in virtually every country in the world through our participation in tradeshows and product range extension. Longer term, we are also aiming to become the world’s largest nitrile glove manufacturer.

Top Glove’s medium-term target is to grow its share of the rubber gloves market from 25% currently to 30% over the next few years. Over the longer-term, the company intends to become the world’s largest nitrile gloves manufacturer.

One way the company intends to grow its business is through acquisitions. Here’s more from Top Glove on the subject:

“In addition to our aggressive organic expansion plans, we are as a matter of course, also continuously on the lookout for M&A and joint venture opportunities within the region. Preparations to commence our condom manufacturing business are already underway, which represents one of several new ventures we aim to undertake, as we work to further diversify our business.”

Top Glove has already started on deals, a recent one being the proposed acquisition of Aspion that was announced in late November. Aspion is the second largest surgical gloves producer in the world, and the deal has a size of between RM 1.3 billion to RM 1.4 billion. The acquisition, if it goes through, will establish Top Glove as one of the largest surgical gloves producer in the world with a production capacity of 1.8 billion gloves in FY18.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore contributor Lawrence Nga doesn’t own shares in any companies mentioned.