TOP GLOVE CORPORATION BHD - Investor Presentation 22 March 2018
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TOP GLOVE CORPORATION BHD
Investor Presentation
22 March 2018
Page 1/26
Bursa Malaysia : 7113 SGX : BVA Reuters : TPGC.KL Bloomberg : TOPG MK ADR CUSIP : 890534100
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).
Page 2/26
Steady Global Demand Growth
World population estimate at 7.6 bil, average usage 29 pcs per population
bil pcs
Estimate global demand growth at 6% to 8% pa 220
220
201
200 190
180
180 173
160
160 153
136 135
140 127 128
123
120 110
103
100
80
60
40
20
0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E
Page 3/26
Source : Malaysia Rubber Gloves Manufacturer Association (MARGMA)
An Industry with Excellent Growth Potential
Widely Used in Developed Nations, but Underused in Emerging Countries
% of World Population % of Global Glove Consumption
Developed countries
(USA, EU29 and Japan) 18% 70%
Other regions 82% 30%
% of Global Glove Consumption by Region
Page 4/26
Source: International Trade Centre and Company & www.worldometers.info
Top Glove Global Customer Base
• 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.
Region Avg growth rate for the 3 years Sales volume by geography
1HFY18 (Sep’17 to Feb’18)
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%
Page 5/26
Aligning Our Product Mix with Market Demand
Product mix by volume 1HFY18 product mix by revenue
Nitrile glove
Latex powdered glove
Latex powder-free glove
Vinyl / TPE / CPE glove
Surgical glove
Page 6/26
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
China
Malaysia
1 glove factory
25 glove factories
Producing:
1 glove former factory
•Vinyl gloves
2 chemical factory
1 packaging material plant
Thailand
Producing:
•Latex examination
gloves
•Nitrile examination gloves
2 glove factories
•Surgical gloves
2 latex plants
•Household gloves
•Cleanroom gloves Producing:
•CPE/TPE gloves •Latex examination
•Former manufacturing gloves
•Chemical manufacturing •Latex concentrate
•Packaging material plant
Page 7/26
Statistics as at Feb 2018
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
Glove Type No. of Capacity Target to
production pcs p.a. commence
lines operations by
Current: 28 glove factories 544 lines 51.6 bil
Expansion in progress :
F31 (Klang, Malaysia) New factory Nitrile 30 lines 3.0 bil June 2018
F32 (Klang, Malaysia) New factory Nitrile 48 lines 4.8 bil Early 2019
Total expansion by early 2019 78 lines 7.8 bil
Aspion (3 factories): Surgical 17 lines 1.5 bil April 2018
Nitrile 33 lines 2.1 bil
Latex 15 lines 1.0 bil
Upon completion of Aspion acquisition 65 lines 4.6 bil
Total by early 2019: 33 glove factories 687 lines 64.0 bil
Page 8/26
Strategic rationale for the acquisition of Aspion Sdn Bhd
1 Instantly propels Top Glove to become the #1 surgical glove manufacturer globally
2 Overcome entry barriers into the surgical glove market
3 Capturing markets in specialized surgical gloves
4
Acquire access to new, innovative technologies, surgical glove manufacturing processes
know-how and proprietary materials
Reap substantial synergies through cross-leveraging Top Glove and Aspion’s
5 respective expertise in examination and surgical gloves
6 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
7 Transaction is financially attractive for Top Glove
Page 9/26
Aspion acquisition instantly propels Top Glove to become the #1
surgical glove manufacturer globally
Future Potential In Capturing Markets From MNCs
Global Surgical Market Share in 2015
1) Current surgical market is mainly
dominated by MNCs
2) Post-acquisition, Top Glove will be
10% the single largest surgical glove
13%
7% producer globally
Top Glove + 12%
Aspion 29% 3) Potential for capturing more
20% Others
production from MNCs in the future,
hence increasing profitability
17%
4) Accelerates Top Glove’s plan to
21%
attain 30% market share in the
global rubber glove market by 2020
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
Page 10/26Capturing markets in specialised surgical gloves through
acquisition of Aspion
Aspion’s Highly Specialised Surgical Gloves
Access to Aspion’s specialised surgical gloves
Preference product range as compared to Top Glove’s
Protection Comfort
Microsurgery current surgical gloves which are mainly for
Orthopaedic
Neurosurgery general surgery application
Trauma
High risk surgery Photorefractive
keratactomy Broad range of specialized surgical gloves caters
Mid range
to different medical practice areas
FUSION FUSION
Microsurgery barrierONE
Reconstructive
gloves are :
Opthalmic operation Sensiflex Maxitex Maxitex Maxitex
Zero chemicals a) The most comfortable with ultra low stress
Plus Neuro PF PF UG PF
Orthopeadic General surgery b) The safest with world’s lowest breach of
Endoscopic barrier of less than AQL of 0.1
Maxitex Maxitex
Duplex PF Duplex Maxitex Nuzone X2 surgery
c) No dermal sensitization or allergy trigger from
Obstetrics
Gynaecology zero chemicals exposure
Entry
Ulma Fortis PF Ulma Fortis
d) Built-in Reactive Disinfection System
Top Glove will benefit from Aspion's
premium product offering, enhanced by
Examination gloves
Nugard Nugard Nitril Sensiflex
Aspion’s game changing product that is
expected to lead the trend in preference
glove adoption in developed nations
Page 11/26Acquire Aspion access to new, innovative technologies, surgical
glove manufacturing process know-how and proprietary materials
Cutting Edge Technology: FINESSISTM Surgical Glove Using FlexylonTM
“Game changing”
product Superior
targets entire top-range
Quality
segment
Over 3 mil pairs shipped
Superior GP contribution
over 10 months, with
per pair is expected to
ability to scale up to Safety and No Allergens
boost profitability
capacity of 24 mil No Latex allergens
Zero chemical accelerators
No chemical allergens
5 years to develop
FDA, EU and TGA Protection (AQLProposed acquisition is financially attractive for Top Glove
Solid increase in net income EPS accretion for Top Glove shareholders
(MYR million) (MYR sen)
455(2)
35.7(2)
32.4(1)
407(1)
Pre-acquisition Pro-forma Pre-acquisition Pro-forma
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
Page 13/26Cost breakdown
Natural Rubber Gloves Nitrile Gloves
• 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.
Page 14/26Raw Material Price Trend
Natural rubber latex price trend (RM/kg)
Correlation between natural rubber latex, nitrile latex and crude oil prices (USD/kg)
Page 15/26
Note: NR Latex & Nitrile Latex based on 60% TSCA Strong Quarter Performance
2Q18 2Q17 Variance 1Q18 Variance
1 Dec 17 – 1 Dec 16 – (2Q18 vs 1 Sep 17 – (2Q18 vs
28 Feb 18 28 Feb 17 2Q17) 30 Nov 17 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%
• 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.
Page 16/266 months results
1H18 1H17 Variance 2H17 Variance
1 Sep 17 – 1 Sep 16 – (1H18 vs 1 Mar 17 – (1H18 vs
28 Feb 18 28 Feb 17 1H17) 31 Aug 17 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%
• 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. Page 17/26Sales volume (quantity) comparison by glove type
Quarterly and half-yearly comparison
2QFY18 vs 2QFY17 2QFY18 vs 1QFY18 1HFY18 vs 1HFY17
Latex powdered 21% 5% 15%
Latex powder free 20% 6% 19%
Nitrile 14% 2% 15%
Vinyl 29% 6% 24%
Surgical 24% 4% 18%
TPE/CPE 82% 1% 83%
Total increase 21% 3% 19%
Positive impact Negative impact Page 18/26Sales volume (quantity) comparison by region
Half-yearly comparison (1HFY18 vs 1HFY17)
Western Europe Eastern Europe
41% Asia ex Japan
14%
61%
NORTH Eastern
AMERICA
Western
Europe ASIA
Europe Japan
North America MIDDLE 45%
EAST JAPAN
0%
AFRICA
LATIN
Latin America AMERICA
5%
Middle East
34%
Africa
2%
Page 19/26External Factors : Quarterly Comparison
2QFY18 vs 2QFY17 2QFY18 vs 1QFY18 1HFY18 vs 1HFY17
Natural Rubber Latex
(RM/kg) 12% 10%
26%
Nitrile Latex
2% 5% 1%
(USD/kg)
USD vs MYR 11% 5% 5%
Avg Selling Price
4% 4% 3%
(USD)
Natural Gas (RM/mmbtu) 15% 15% 6%
Positive impact Negative impact
Page 20/26Steady growth since listing
Revenue CAGR PAT CAGR Average PAT margin
Past 17 years since Past 17 years since Past 17 years since
listing in 2001 : listing in 2001 : listing in 2001 :
22.1% 20.9% 9.5%
For FY ended 31 August
1HFY18
(in RM’mil) 2010 2011 2012 2013 2014 2015 2016 2017
(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 *
Page 21/26
* Annualised **Adjusted for bonus issueHealthy balance sheet
1HFY18 1HFY17
28 Feb 18 28 Feb 17
Net cash flow from operating activities (RM’mil) 153.8 64.6
Capital expenditure (RM’mil) 213.3 213.1
As at 28 Feb 18 As at 28 Feb 17
Net borrowing/net cash and short term investment
(265.0) 38.6
(RM’mil) **
2,111.6 1,909.6
Shareholders equity (RM’mil)
1.68 1.52
Net assets per share (RM)
20.3% 16.4%
Return on equity
30 34
Inventory turnover days
47 49
Receivable turnover days
41 39
Payable turnover days
36 44
Working capital turnover days
** Reduction in cash balance due to spending on capital expenditure and acquisition in 1HFY2018 of Page 22/26
RM396.55 millionDividend and payout ratio
Dividend Policy : Payout ratio of 50% of PAT after MI
Total dividend payment
of RM1,161 mil since
listing in 2001
Page 23/26
Note: Dividend per share has been adjusted with the bonus issuesAt 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:
*share Number of Total market Accumulated Cost of Capital Total s/holders
Date Price shares held Value dividend investment appreciation return %
(RM) (RM) received (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%
*adjusted for bonus issue and share split
If the bonus issues and share split are not taken into consideration, the share price would have
been RM198.95 per share.
Top Glove list of Component Stock
FTSE Bursa Malaysia FTSE4Good Bursa Malaysia FTSE Bursa Malaysia Hijrah
("FBM") Mid 70 Index Index [ESG Index] Shariah Index
FBM Top 100 Index FBM Emas Syariah Index FBM Emas Index
Page 24/26Management focus moving forward
• 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
Page 25/26Thank you
Q & A Session
www.topglove.com | invest@topglove.com.my | +603 3362 3098
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