TOP GLOVE CORPORATION BHDapp.pmgasia.com/InvestAsean2018/pdf/Top Glove_23032018.pdf · 2018. 4....
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Page 1/26 Page 1/26 TOP GLOVE CORPORATION BHD Investor Presentation 22 March 2018 Bursa Malaysia : 7113 SGX : BVA Reuters : TPGC.KL Bloomberg : TOPG MK ADR CUSIP : 890534100
Transcript of TOP GLOVE CORPORATION BHDapp.pmgasia.com/InvestAsean2018/pdf/Top Glove_23032018.pdf · 2018. 4....
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TOP GLOVE CORPORATION BHDInvestor Presentation
22 March 2018
Bursa Malaysia : 7113 SGX : BVA Reuters : TPGC.KL Bloomberg : TOPG MK ADR CUSIP : 890534100
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Modest Beginnings
• Founded in 1991 by Tan Sri Dr Lim Wee Chai.
Family owned a small rubber plantation and was involved in the rubber trading
business.
Top Glove commenced operations with 1 factory, 3 production lines and 100
staff.
At that time, there were around 250 glove manufacturers in Malaysia following
the surge in glove demand due to the AIDS epidemic.
With oversupply and stringent quality standards imposed by the FDA, many
players were edged out of the industry.
Top Glove remained in business, and grew leaps and bounds, having set the
good Business direction of producing high quality gloves at efficient low
cost.
• Top Glove has emerged as the world’s largest manufacturer of gloves with:-
A sizeable production capacity of 51.6 billion gloves per annum.
A listing on Bursa Malaysia (2001) and SGX (2016).
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World population estimate at 7.6 bil, average usage 29 pcs per population
Steady Global Demand Growth
Source : Malaysia Rubber Gloves Manufacturer Association (MARGMA)
103110
123 127 128136 135
153160
173180
190201
220
0
20
40
60
80
100
120
140
160
180
200
220
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E
bil pcsEstimate global demand growth at 6% to 8% pa
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An Industry with Excellent Growth Potential
Source: International Trade Centre and Company & www.worldometers.info
% of World Population % of Global Glove Consumption
Developed countries
(USA, EU29 and Japan)
Other regions
Widely Used in Developed Nations, but Underused in Emerging Countries
% of Global Glove Consumption by Region
70%
30%
18%
82%
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• Over 2,000 customers and growing.
• Comprising mainly distributors across 195 countries.
• A geographically diverse customer base.
• A preferred OEM manufacturer in every region.
• No single customer contributes more than 4% of revenue.
Top Glove Global Customer Base
Sales volume by geography
1HFY18 (Sep’17 to Feb’18) Region Avg growth rate for the 3 years
North America 10.8%
Europe 11.3%
Japan 13.2%
Asia ex Japan 12.9%
Middle East 6.3%
Latin America 3.8%
Africa -8.1%
Total 8.8%
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1HFY18 product mix by revenue
Aligning Our Product Mix with Market Demand
Latex powdered glove
Nitrile glove
Vinyl / TPE / CPE glove
Surgical glove
Latex powder-free glove
Product mix by volume
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China
1 glove factory
Producing:
•Vinyl gloves
Thailand
2 glove factories
2 latex plants
Producing:
•Latex examination
gloves
•Latex concentrate
Statistics as at Feb 2018
34 Manufacturing Facilities Regionwide
• 28 glove factories | 544 production lines | 51.6 billion pcs p.a. capacity
• 2 latex concentrate/processing plants supplying 60% to 70% of our latex requirements
• 1 porcelain hand mold factory
• 2 chemical factory
• 1 packaging material plant
• Steadily expanding via organic and non-organic growth
Malaysia
25 glove factories
1 glove former factory
2 chemical factory
1 packaging material plant
Producing:
•Latex examination
gloves
•Nitrile examination gloves
•Surgical gloves
•Household gloves
•Cleanroom gloves
•CPE/TPE gloves
•Former manufacturing
•Chemical manufacturing
•Packaging material plant
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Glove Type No. of
production
lines
Capacity
pcs p.a.
Target to
commence
operations by
Current: 28 glove factories 544 lines 51.6 bil
Expansion in progress :
F31 (Klang, Malaysia) New factory
F32 (Klang, Malaysia) New factory
Total expansion by early 2019
Aspion (3 factories):
Upon completion of Aspion acquisition
Nitrile
Nitrile
Surgical
Nitrile
Latex
30 lines
48 lines
78 lines
17 lines
33 lines
15 lines
65 lines
3.0 bil
4.8 bil
7.8 bil
1.5 bil
2.1 bil
1.0 bil
4.6 bil
June 2018
Early 2019
April 2018
Total by early 2019: 33 glove factories 687 lines 64.0 bil
Blueprints for Expansion
• Boosting nitrile capacity in tandem with growing demand
• Faster, more efficient and technologically advanced production lines
• Increased automation throughout the manufacturing process
• On-going facility optimization initiatives which include the construction of highly-efficient factories
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Strategic rationale for the acquisition of Aspion Sdn Bhd
Instantly propels Top Glove to become the #1 surgical glove manufacturer globally
Reap substantial synergies through cross-leveraging Top Glove and Aspion’srespective expertise in examination and surgical gloves
Overcome entry barriers into the surgical glove market
Expand Top Glove’s healthcare industry presence by extending its surgical gloves distribution into new regions and countries; immediate access to North America, Europe and Japan
Capturing markets in specialized surgical gloves
Transaction is financially attractive for Top Glove
Acquire access to new, innovative technologies, surgical glove manufacturing processes know-how and proprietary materials
1
2
6
5
3
4
7
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Aspion acquisition instantly propels Top Glove to become the #1
surgical glove manufacturer globally
1) Current surgical market is mainly
dominated by MNCs
2) Post-acquisition, Top Glove will be
the single largest surgical glove
producer globally
3) Potential for capturing more
production from MNCs in the future,
hence increasing profitability
4) Accelerates Top Glove’s plan to
attain 30% market share in the
global rubber glove market by 2020
13% 10%
7%
20%
21%
17%
12%
Others
Top Glove +
Aspion 29%
Global Surgical Market Share in 2015
Future Potential In Capturing Markets From MNCs
Reinforces Top Glove’s position as the world’s leading glove manufacturer, with potential to capture more market
share from a space that has been traditionally dominated by MNCs
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Preference
Mid range
Entry
Examination gloves
FUSIONbarrierONE
FUSION
MaxitexDuplex
MaxitexDuplex PF Maxitex Nuzone X2
Ulma Fortis PF Ulma Fortis
Nugard NitrilNugard Sensiflex
SensiflexPlus
MaxitexNeuro PF
MaxitexPF
MaxitexUG PF
Capturing markets in specialised surgical gloves through
acquisition of Aspion
Top Glove will benefit from Aspion's
premium product offering, enhanced by
Aspion’s game changing product that is
expected to lead the trend in preference
glove adoption in developed nations
Aspion’s Highly Specialised Surgical Gloves
Orthopeadic
Microsurgery
Reconstructive
Opthalmic operation
Protection
Orthopaedic
Trauma
High risk surgery
Comfort
Microsurgery
Neurosurgery
Photorefractive
keratactomy
Zero chemicals
General surgery
Endoscopic
surgery
Obstetrics
Gynaecology
Access to Aspion’s specialised surgical gloves
product range as compared to Top Glove’s
current surgical gloves which are mainly for
general surgery application
Broad range of specialized surgical gloves caters
to different medical practice areas
gloves are :
a) The most comfortable with ultra low stress
b) The safest with world’s lowest breach of
barrier of less than AQL of 0.1
c) No dermal sensitization or allergy trigger from
zero chemicals exposure
d) Built-in Reactive Disinfection System
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Acquire Aspion access to new, innovative technologies, surgical
glove manufacturing process know-how and proprietary materials
1) Opportunity to expand into top preference gloves
2) Estimated 7 years of research ahead of competitors
3) Surpasses current high-end synthetic options
FDA, EU and TGA
regulatory approvals have
been received
5 years to develop
Finessis, “Flexylon”
material created using
proprietary R&D
Over 3 mil pairs shipped
over 10 months, with
ability to scale up to
capacity of 24 mil
“Game changing”
product
targets entire top-range
segment
Superior GP contribution
per pair is expected to
boost profitability Safety and No Allergens
No Latex allergens
Zero chemical accelerators
No chemical allergens
Superior
Quality
Protection (AQL<0.1)
Strong barrier efficiency
Block passage of viruses
Virtually no pinholes
Lasting Comfort
Ultra low stress on hands
Comfortable wear through
surgery
Cutting Edge Technology: FINESSISTM Surgical Glove Using FlexylonTM
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Solid increase in net income
Proposed acquisition is financially attractive for Top Glove
Transaction is expected to be 10.2% accretive for Top Glove on a 2018E pro-forma EPS basis
Note: Pro-forma financials are based on Top Glove’s 2018E consensus estimates and Aspion’s 2018E Core PAT (1) Source: Bloomberg, as of 11 Jan 2018(2) Takes into account the reduction of net income arising from the post-tax interest costs of MYR32 mil associated with the financing of the transaction
EPS accretion for Top Glove shareholders
407(1)
455(2)
Pre-acquisition Pro-forma
(MYR million)
32.4(1)
35.7(2)
Pre-acquisition Pro-forma
(MYR sen)
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Cost breakdown
• A cost pass-through mechanism whereby both cost increases and
savings to be shared out with customers.
• Continuously improving cost efficiency through intensive R&D initiatives.
Natural Rubber Gloves Nitrile Gloves
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Raw Material Price Trend
Natural rubber latex price trend (RM/kg)
Correlation between natural rubber latex, nitrile latex and crude oil prices (USD/kg)
Note: NR Latex & Nitrile Latex based on 60% TSC
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2Q18
1 Dec 17 –
28 Feb 18
2Q17
1 Dec 16 –
28 Feb 17
Variance
(2Q18 vs
2Q17)
1Q18
1 Sep 17 –
30 Nov 17
Variance
(2Q18 vs
1Q18)
Total sales (RM’mil) 958.4 851.5 12.6% 938.1 2.2%
EBITDA (RM’mil) 158.0 126.7 24.7% 151.3 4.4%
EBITDA margin 16.5% 14.9% 16.1%
PBT (RM’mil) 124.5 102.7 21.2% 122.0 2.0%
PBT margin 13.0% 12.1% 13.0%
PAT (RM’mil) 110.0 83.2 32.2% 105.9 3.9%
PAT margin 11.5% 9.8% 11.3%
EPS (sen) 8.7 6.6 31.8% 8.4 3.6%
A Strong Quarter Performance
• Sales quantity up by 21% vs 2Q17 and 3% vs 1Q18.
• ASP up by 4% vs 2Q17 and 1Q18.
• Natural rubber latex price down by 26% vs 2Q17 and 12% vs 1Q18.
• Nitrile latex down by 2% vs 2Q17 and up by 5% vs 1Q18.
• USD weakened by 11% vs 2Q17 and 5% vs 1Q18.
• 2Q18 with natural gas price up by 15% vs 2Q17 and 1Q18.
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1H18
1 Sep 17 –
28 Feb 18
1H17
1 Sep 16 –
28 Feb 17
Variance
(1H18 vs
1H17)
2H17
1 Mar 17 –
31 Aug 17
Variance
(1H18 vs
2H17)
Total sales (RM’mil) 1,896.6 1,637.1 15.9% 1,772.1 7.0%
EBITDA (RM’mil) 309.3 238.1 29.9% 245.9 25.8%
EBITDA margin 16.3% 14.5% 13.9%
PBT (RM’mil) 246.5 192.5 28.1% 190.6 29.3%
PBT margin 13.0% 11.8% 13.0%
PAT (RM’mil) 215.9 156.8 37.7% 171.6 25.8%
PAT margin 11.4% 9.6% 9.7%
EPS (sen) 17.1 12.5 36.8% 13.7 24.8%
6 months results
• 1H18 profit after tax was 66% of FY17 full year profit.
• Sales quantity up by 19% vs 1H17.
• ASP up by 3% vs 1H17.
• Natural rubber latex price down by 10% vs 1H17.
• Nitrile latex up by 1% vs 1H17.
• USD weakened by 5% vs 1H17.
• 1H18 with natural gas price up by of 6% vs 1H17.
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Sales volume (quantity) comparison by glove type Quarterly and half-yearly comparison
Latex powdered
Latex powder free
Nitrile
Surgical
Total increase
21%
20%
14%
24%
21%
2QFY18 vs 2QFY17
Vinyl 29%
TPE/CPE 82%
5%
6%
2%
4%
3%
2QFY18 vs 1QFY18
6%
1%
15%
19%
15%
18%
19%
1HFY18 vs 1HFY17
24%
83%
Positive impact Negative impact
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Middle East34%
North America 0%
Latin America5%
Africa2%
Western Europe14%
Eastern Europe41%
Japan45%
Asia ex Japan61%
NORTH
AMERICA
LATIN
AMERICA
AFRICA
MIDDLE
EAST
Western
Europe
Eastern
Europe ASIA
JAPAN
Sales volume (quantity) comparison by regionHalf-yearly comparison (1HFY18 vs 1HFY17)
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Natural Rubber Latex
(RM/kg)
Nitrile Latex
(USD/kg)
USD vs MYR
Avg Selling Price
(USD)
11%
4%
2%
26%
Positive impact Negative impact
Natural Gas (RM/mmbtu) 15%
External Factors : Quarterly Comparison
2QFY18 vs 2QFY17
4%
5%
12%
5%
2QFY18 vs 1QFY18
15%
5%
3%
1%
6%
1HFY18 vs 1HFY17
10%
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Steady growth since listing
(in RM’mil) 2010 2011 2012 2013 2014 2015 2016 20171HFY18
(unaudited)
Sales 2,079.4 2,053.9 2,314.5 2,313.2 2,275.4 2,510.5 2,888.5 3,409.2 1,896.6
EBITDA 364.7 196.7 297.7 310.6 301.8 441.7 524.7 484.0 309.3
EBITDA margin 17.5% 9.6% 12.9% 13.4% 13.3% 17.6% 18.2% 14.2% 16.3%
PBT 305.0 145.5 240.7 242.2 216.3 363.5 442.2 383.1 246.5
PBT margin 14.7% 7.1% 10.4% 10.5% 9.5% 14.5% 15.3% 11.2% 13.0%
Taxation 54.6 30.3 33.4 39.4 32.7 82.3 79.8 54.7 30.6
PAT 250.4 115.1 207.3 202.8 183.6 281.2 362.4 328.4 215.9
PAT margin 12.0% 5.6% 9.0% 8.8% 8.1% 11.2% 12.5% 9.6% 11.4%
# PAT Equity 245.2 113.1 202.7 196.5 180.5 279.8 360.7 328.6 214.4
ROE (%) 22.4 10.0 16.2 14.9 13.1 17.4 19.9 16.3 20.5
EPS (RM)** 0.20 0.09 0.17 0.16 0.15 0.23 0.29 0.26 0.34
Average PAT marginRevenue CAGR PAT CAGR
20.9%22.1% 9.5%For FY ended 31 August
Past 17 years since
listing in 2001 :Past 17 years since
listing in 2001 :Past 17 years since
listing in 2001 :
* Annualised **Adjusted for bonus issue
*
*
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Healthy balance sheet
As at 28 Feb 18 As at 28 Feb 17
Net borrowing/net cash and short term investment
(RM’mil)
Shareholders equity (RM’mil)
Net assets per share (RM)
Return on equity
Inventory turnover days
Receivable turnover days
Payable turnover days
Working capital turnover days
(265.0)
2,111.6
1.68
20.3%
30
47
41
36
38.6
1,909.6
1.52
16.4%
34
49
39
44
1HFY18
28 Feb 18
1HFY17
28 Feb 17
Net cash flow from operating activities (RM’mil)
Capital expenditure (RM’mil)
153.8
213.3
64.6
213.1
**
** Reduction in cash balance due to spending on capital expenditure and acquisition in 1HFY2018 of
RM396.55 million
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Dividend and payout ratio
Dividend Policy : Payout ratio of 50% of PAT after MI
Note: Dividend per share has been adjusted with the bonus issues
Total dividend payment of RM1,161 mil since listing in 2001
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At 7,983% since IPO (17 years)
With initial investment of 1,000 shares made during initial public offering price of RM2.70 on 27/03/01, the
return is as follows:
If the bonus issues and share split are not taken into consideration, the share price would have
been RM198.95 per share.
Date*share
PriceNumber ofshares held
Total market Value
Accumulated dividend
received (RM)
Cost ofinvestment
Capitalappreciation
Total s/holdersreturn %
(RM) (RM) (RM) (RM)
27-Mar-01 0.13 20,384 * 2,700 - 2,700 - -
02-Jan-13 2.875 20,384 * 58,604 6,825 2,700 62,729 2,323%
02-Jan-14 2.87 20,384 * 58,502 8,460 2,700 64,262 2,380%
02-Jan-15 2.30 20,384 * 46,883 10,091 2,700 54,274 2,010%
05-Jan-16 6.87 20,384 * 140,038 11,824 2,700 149,162 5,525%
04-Jan-17 5.41 20,384 * 110,277 14,576 2,700 122,153 4,524%
02-Jan-18 7.89 20,384 * 160,830 17,531 2,700 175,661 6,506%
22-Mar-18 9.76 20,384 * 198,948 19,264 2,700 215,512 7,983%
Top Glove list of Component Stock
*adjusted for bonus issue and share split
FTSE Bursa Malaysia ("FBM") Mid 70 Index
FTSE4Good Bursa MalaysiaIndex [ESG Index]
FTSE Bursa Malaysia HijrahShariah Index
FBM Top 100 Index FBM Emas Syariah Index FBM Emas Index
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• To use technology and further automate
production line to reduce workers &
improve quality and efficiency.
• Computerize the whole company’s
operations / manufacturing.
• To invest and recruit staff that are:
i. Intelligent
ii. Energetic
iii. Integrity
• Capture growth in emerging market
demand
• Target 30% glove market share in 2020
• To diversify into related businesses (for
example, condom manufacturing) in order
to grow more efficiently and expeditiously
Management focus moving forward
