Glove counters outperform market

PETALING JAYA: The rise in the share prices of Top Glove Corp Bhd and Hartalega Holdings Bhd might be too little too late from being relegated from the benchmark FBM KLCI in the upcoming review of the index unless Top Glove can gain another 45 sen while Hartalega by 70 sen by this week.

Top Glove exited its penny stock status after its share price continued to rally, rising six sen to RM1.02 yesterday, which gave it a market capitalisation of RM8.37bil while Hartalega rose further by five sen to RM2.15 or RM7.37bil in market value, but are still well below the RM12bil capitalisation analysts think the counters need to have to safely remain as FBM KLCI component stocks.

“Based on current calculations, Top Glove would need to reach a stock price of around RM1.50 from its current level before Nov 21 to avoid having its place taken on the index.“This looks a little challenging, unless foreign research houses decide to upgrade their rating to a buy call for the sector,” Rakuten Trade head of equity sales Vincent Lau said.

He added the run-up in glove counters share prices over the past quarter has been “remarkable” as investors are beginning to see value in these stocks again while acknowledging the counters are often subject to over-pessimism or over-optimistic sentiment.

Lau still foresees a challenging end to the year for glove companies, but feels the tide has turned for the better.

Top Glove has been the top performer on the index in terms of percentage gain over the last three months, rising some 19% over the period and 47.8% in the past month while Hartalega is up 8% on a three-month basis and 15.4% on a one month period.

Lau agreed with forecasts that Top Glove and Hartalega may still be replaced on the FBM KLCI in the coming review.

RHB Research, in a note last Friday, predicted the two stocks would be replaced by lender AMMB Holdings Bhd and agro-based business group QL Resources Bhd, based on market capitalisation rankings at the close of business on Nov 21 – if the date does not get declared a public holiday following GE15 two days earlier.

The FBM KLCI is a capitalisation-weighted index, composed of the 30 largest companies on the Bursa Malaysia by market capitalisation.

Apex Securities Bhd noted local institutional investors have been net buyers of Top Glove since September, effectively becoming the main factor for the counter’s positive run.

The research house concurs with the idea Top Glove and Hartalega could potentially be replaced by companies on the FBM KLCI reserve list, which includes Westports Holdings Bhd, Malaysia Airports Holdings Bhd and Gamuda Bhd, although it recognises that AMMB and QL have the highest market capitalisation on that list.

Apex Securities computed that Top Glove would need to achieve a total market capitalisation of RM12bil from its current standing at RM8.37bil before Nov 21 to keep its place in the index.

“The third bottom stock, Inari Amertron Bhd, stands at RM9.8bil, while while AMMB and QL’s market caps stand at RM13.2bil and RM13bil respectively,” it said.

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