Affin Hwang maintains buy on Top Glove, TP at RM12

KUALA LUMPUR: Affin Hwang Capital Research said Top Glove Corp Bhd's latest quarterly results came within its and consensus expectations.

The glovemaker's PATAMI for FY18 grew 32% year-on-year driven by sales volume growth of 26% and improving efficiency. 

The research house said Top Glove was able to continue delivering strong quarter-on-quarter volume growth of 6% in 4QFY18 as its new plant F31 commenced operations and is expected to achieve full capacity by 2019.

"We are forecasting an 8-10% capacity growth for FY19, which is lower than the 15-17% increase incapacity in FY18," it said.

Affin Hwang added that despite EBIT rising 76% y-o-y for FY19, PATAMI was only up 32% due to higher finance expenses and effective tax rate.

"The higher finance cost is attributed to the USD debt that TOPG raised to acquire Aspion. Despite the ongoing lawsuit against the vendor of Aspion, no impairment was allocated during the quarter," it said.

The effective tax rate rose from 14.3% in FY17 to 16.3% in FY18.

The research house maintained its buy rating with an unchanged target price of RM12