With more than a 50% rise in its share price, Top Glove Corporation Berhad (SGX: BVA), the largest glove maker in the world, has been one of the hot stocks in 2018. This week, it released its financial results for the third quarter of 2018, which ended on 31 March 2018. Here are some highlights from its earnings update.
1. Revenue for the quarter climbed 26% to RM1.1 billion from RM869 million the corresponding quarter last year. Consequently, profit from operations increased 58% to RM147 million from RM93 million.
2. Overall profit after tax was RM119 million, a 54% improvement year-on-year. Basic earnings per share for the quarter was 9.36 sen, a 50.9% increase from the 6.2 sen recorded in the corresponding quarter last year.
3. For the 9-month period ended on 31 March 2018, the group recorded RM3.0 billion in revenue, a 19% improvement from the corresponding period last year. Profit after tax during the period was RM335 million, a 41% improvement from the RM234 million last year.
4. Management cited increase in glove demand, particularly in India, China and Vietnam, as the main reasons for the strong revenue and profit growth. It also said lower raw material prices have resulted in improving profit margins.
5. As of 31 March 2018, the group had total assets of RM5.06 billion and liabilities of RM2.78 billion. Total shareholder equity stood at RM2.28 billion.
6. Net asset value per share was RM1.78, an 18 sen or 11.25% improvement from 31 August 2017.
7. As of 31 March 2018, the group had borrowings totaling RM2.06 billion, and had a cash hoard of RM190.9 million. This puts it in a net debt position of RM1.87 billion. It also had a gearing ratio of around 41%.
8. The group generated RM298.8 million from operations for the 9-month period. This is 68% more than the same period last year. However, the group spent heavily on investments for expansion during the period, amounting to RM1.6 billion in cash used in investments. Consequently, the group had a negative free cash flow of RM1.32 billion.
9. On prospects for the future, the group’s management said:
“As a growing and dynamic company, Top Glove will continue to expand its manufacturing capabilities, organically as well as through M&As and joint ventures. The construction of Factory 31 (operational by July 2018) and Factory 32 (operational by early 2019) is underway, which upon completion, will increase the Group’s total number of production lines by an additional 74 lines and production capacity by 7.4 billion gloves per annum. Meanwhile, Top Glove’s condom manufacturing facility is expected to be operational by end of June 2018.”
“While the USD shows signs of strengthening, the operating environment is still expected to be challenging. Nonetheless, the Group remains upbeat in terms of outlook.”
10. At the time of writing, shares of Top Glove exchanged hands at S$3.95 per piece. This translates to a price-to-book ratio of 6.56, an annualised price-to-earnings ratio of 32 and a trailing dividend yield of 0.75%.
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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. The Motley Fool Singapore has recommended shares of Top Glove Corporation Berhad. Motley Fool Singapore contributor Jeremy Chia doesn’t own shares in any companies mentioned.