Top Glove to spend RM8b capex in next six years
18 Sep 2020
Top Glove Corp Bhd has earmarked RM8 billion for capital expenditure (capex) over the next six years, indirectly brushing aside concerns over a glove glut or fiercer competition from new entrants.
The massive capex was disclosed after Top Glove posted its best ever full-year net profit and revenue.
The group’s net profit surged to an all-time high of RM1.87 billion in the year ended August 31 2020 from RM364.68 million previously.
This came on tne back of a record revenue of RM7.24 billion, a significant increase from last year’s revenue of RM4.8 billion.
Top Glove has recommended a final dividend of 8.5 sen per share, amounting to a payout of RM691.8 million. This brings the total financial year dividend payout to 11.8 sen per share, amounting to a total payout of RM961.2 million.
The total dividend of 11.8 sen represents an increase of 9.3 sen or 373 per cent over financial year 2019, which is a net profit payout ratio of 51 per cent.
Top Glove executive chairman Tan Sri Dr Lim Wee Chai said the capex would be invested in several key areas including new capacity, enhancement of existing manufacturing facilities, Industry 4.0 initiatives, a gamma sterilisation plant, land bank for future expansion, IT upgrades, as well as workers’ facilities.
“The expansion of its production line over the six years will add 100 billion pieces per annum to the group’s production capacity from the current 85.5 billion pieces per annum.
“For financial year ending August 31, 2021, the company is planning to invest RM1.9 billion in capex to build new factory, buy new machinery and acquire land,” he told reporters and analysts during a virtual briefing of Top Glove’s 2020 performance yesterday.
Managing director Datuk Lee Kim Meow said the sizeable capex was allocated to meet the growing market demand for its glove products and the company’s optimism on the increase in average selling prices (ASPs) moving forward.
Lee said the average ASP for nitrile gloves was at US$70 per 1,000 pieces and US$45 for latex gloves.
“In October, the group expects a 30 per cent increase in ASPs for nitrile gloves and a five per cent increase in latex gloves ASPs, with a potential on another 10 per cent increase for both glove products beginning November onward,” said Lee.
He said with Covid-19, Top Glove had estimated that glove demand would grow by 20 per cent per annum in 2020, 25 per cent in 2021 and 15 per cent post-Covid-19.
Meanwhile, Lim said Top Glove was planning to list on the Stock Exchange of Hong Kong in the next six to nine months, as it eyed for expansion beyond Malaysia and Singapore shores.
He said the company was in talks with bankers to find the most suitable method to go for listing in Hong Kong.
Besides Malaysia, the company is also currently listed on the Singapore Exchange.
Top Glove’s American Depositary Receipt (ADR) is also available in over the counter exchange in the US.
“We always think big and dream big, in hope of achieving big. As you know, Hong Kong stock exchange has a market capitalisation of US$5.5 trillion, which is 10 times of Malaysia or Singapore.
“This is a big market and we always look to higher value add in bigger market. Similar to our glove business, we would like to create demand for our shares and there are demand for it (in Hong Kong) — it is a good direction for us,” Lim said.
Despite announcing the strong results, Top Glove closed 64 sen lower on Thursday, or 7.59 per cent, at RM7.79.
Source: NST Posted on : 18 September 2020
