Top Glove Drops Most in 40 Months as Forecasts Cut

Top Glove Corp., the world’s biggest rubber-glove maker, fell the most in more than three years in Kuala Lumpur as brokerages from HwangDBS Research Sdn. to UOB Kay Hian Group cut their profit forecasts on higher costs and slower demand.

The stock slid 6.1 percent to 5.12 ringgit at the 5 p.m. close, its steepest drop since Aug. 16, 2007, the biggest decliner on the 347-member FTSE Bursa Malaysia EMAS Index today. Top Glove yesterday reported a 45 percent drop in fiscal first- quarter net income.

“Demand remains soft and latex prices are at a record high,” Hon Seow Mee, an analyst at HwangDBS, said in a report today. “Top Glove is being pressured by rising operating costs given that 83 percent of its gloves are made from natural rubber latex.” Hon lowered his share-price estimate to 4.60 ringgit from 4.80 ringgit and fiscal 2011 earnings forecast by 9 percent.

The Klang, Selangor-based company’s shares surged 188 percent last year as global demand for medical rubber gloves outstripped supply amid a wave of global flu scares. Demand is now slowing as customers hold back on purchases in anticipation of lower prices amid rising competition, UOB said in a report.

At least seven brokerages today cut their share estimates for Top Glove to an average 4.69 ringgit, according to calculations by Bloomberg. The range was between 3.66 ringgit and 6.06 ringgit.

Forecasts Slashed

Net income fell 45 percent to 36.1 million ringgit ($11.5 million) in its fiscal first quarter, the Malaysian company said in an exchange filing yesterday. Average latex prices were 57 percent higher than a year ago, while the dollar was 9.3 percent weaker against the ringgit, said Top Glove, which sells its products in the U.S. currency.

RHB Research Institute Sdn. cut its price estimate to 4.10 ringgit from 5.40 ringgit while OSK Research Sdn. lowered its forecast to 5.74 ringgit from 6.06 ringgit, reports said today.

UOB reduced its fiscal 2011 earnings estimate for Top Glove by 25 percent, and 18 percent each for 2012 and 2013, it said in a report today. UOB also cut its share estimate to 3.66 ringgit from 5.02 ringgit.

“Demand is indeed slowing,” UOB said. Top Glove is facing “difficulties passing on higher costs to customers as manufacturers compete on pricing.”

Customers’ inventory holding period has fallen to one to two months from an average of three to four months, UOB said.

To contact the reporters on this story: Chan Tien Hin in Kuala Lumpur at thchan@bloomberg.net; Barry Porter at bporter10@bloomberg.net

To contact the editor responsible for this story: Darren Boey in Hong Kong at dboey@bloomberg.net

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