KUALA LUMPUR: Top Glove Corporation Bhd's earnings for the nine-month period ended May 31, 2021 have missed expectations as sales volumes are affected by the halt in shipments of its products to the US from Malaysia, RHB Research said.
The firm said Top Glove's net profit of RM7.26 billion for the nine months had made up 74 per cent and 68 per cent of consensus' and its full-year estimates.
"This was below expectations as sales volume were lower than expected. We gather that Top Glove's sales volumes (down four per cent quarter-on-quarter) were affected by the halt in shipments of its products to the US from Malaysia," it said today.
Over at Bursa Malaysia, shares of Top Glove eased as much as three sen or 0.5 per cent to RM4.81 in early trade today.
The stock ended the day four sen lower or 0.83 per cent at RM4.80.
RHB Research said Top Glove's 18 sen dividend for the third quarter (Q3) represented 71 per cent of its 25.44 sen earnings per share (EPS) for the period.
Against the current share price, the dividend offered a 3.7 per cent yield, it added.
RHB Research has cut Top Glove's financial years 2021, 2022 and 2023 blended average selling prices (ASPs) to US$65, US$42 and US$33 from US$69, US$49 and US$35 respectively.
"As Top Glove Malaysia will not be able to sell into US markets until the WRO (withhold release order) is lifted, its blended ASPs will be affected, as glove ASPs are higher in the US. The utilisation rate has also been reduced to reflect the lower sales volumes.
"We have assumed that Top Glove's lower blended ASPs will stay as long as the CBP's (US Customs and Border Protection) WRO remains intact."
The firm added that to compensate for the volume loss in the US, Top Glove would need to compete in terms of pricing in its other markets, which could risk further ASP erosion.
RHB has downgraded Top Glove to "neutral" from "buy" with a lower target price of RM4.90 from RM6.80 previously.