Top Glove Fair Value Analysis (9 December 2020)
Today Top Glove released its 1QFY2021 report. You can access the full report here.
The stock has been trading at below RM7 level for the better part of the last few weeks on a myriad of news perceived as bad. Albeit all that, the company posted a net profit of RM2.38 billion for the quarter. They have approximately 8.2 billion outstanding shares. This gives the company an EPS of RM0.29 for the quarter. Let's do a bit of calculating:
- Assume the profits don't increase (they are expected to, but we will be conservative).
- This would mean an EPS of RM1.16 for FY2021.
- This translates into a forward P/E of 6 at price RM7 (as of writing this, the price is RM6.84)
This make is one of the lowest valued stocks in the entire stock market, with only 5 companies having forward P/Es of below 6 at the time of writing this.
If we assume that a stock is fairly priced at P/E 15, this would mean that the fair value of Top Glove is RM17.40.
At the same time, one of Top Glove's main competitors in the glove manufacturing market - Hartalega, has a consensus forward P/E of about 19.5 based on its current market price.
Let's assume that the market assigns the same valuation to Top Glove as it does to its direct competitor and simiarly-sized peer Hartalega. In this case, Top Glove's market price would be RM22.62.
https://klse.i3investor.com/blogs/bursainvestments/2020-12-09-story-h1537503578-Top_Glove_Fair_Value_Analysis_9_December_2020.jsp
