Top Glove eyeing acquisition targets in Malaysia

Top Glove eyeing acquisition targets in Malaysia

Tags: Influenza A (H1N1) | KM Lee | M&A | Malaysian entities | Medi-Flex Ltd | organic growth | Top Glove Corp Bhd

Written by Chong Jin Hun
Monday, 19 October 2009 11:21

KLANG: Top Glove Corp Bhd’s potential merger and acquisition (M&A) targets are most likely to be Malaysian entities and any such exercises will only be carried out at low and attractive prices, its managing director KM Lee said.

They will be financed via internal funds, helped by its net cash position of some RM176 million.

“It’s good to keep it (cash) handy in case the oppportunity of possible M&As comes our way,” Lee told The Edge Financial Daily in an interview.

Organic growth and M&As are expected to be key highlights of Top Glove’s intention to retain its supremacy in the international glove manufacturing sector. It aims to increase its present global market share of 22% to 30% by 2012.

Top Glove had in 2007 finalised the acquisition of a controlling stake in Singapore-listed rival Medi-Flex Ltd for some S$21 million (RM50.86 million).

The purchase of Medi-Flex, which owns two glove manufacturing plants in Klang and Banting in Selangor, was intended to help Top Glove expand its product range to include medical and cleanroom gloves.

Going forward, Lee said Top Glove was forecasting a conservative 10% annual revenue growth for the current and next financial year as the company builds more factories and expands its domestic production capacity.

With a cash hoard of RM176 million, Lee says Top Glove is in a good position to look for acquisitions that will help it maintain its position as the world's biggest rubber glove producer. Photo by Suhaimi Yusuf

For now, a larger output for Top Glove is deemed crucial to fulfil rising global demand for disposable gloves, due to the Influenza A(H1N1) outbreak.

Lee said these factories, to cost some RM35 million each, would be built on company-owned industrial land in Klang.

“Capacity expansion is the one (factor) that will see us moving forward in the long term. It’s quite traditional for us to build one to two factories every year.

“A lot also depends on how the A(H1N1) unfolds in the coming winter months (in the northern hemisphere),” he said.

Top Glove’s latest set of financials has improved. Net profit more than doubled to RM56.83 million in the fourth quarter ended Aug 31, 2009 from RM25.11 million a year earlier, helped by cost efficiency and higher demand for disposable gloves due to the A(H1N1) outbreak. Revenue rose 17.2% to RM427.35 million from RM364.53 million.

Full-year net profit rose 53.6% to RM169.15 million from RM110.1 million, while revenue increased by 10.9% to RM1.53 billion from RM1.38 billion.

Globally, Top Glove owns 19 factories, of which 17 are glove production facilities while the remaining two are latex concentrate plants in Thailand.

The company has 13 glove factories in Malaysia, and two each in Thailand and China. Together, they produce up to 31.5 billion pieces of gloves a year.

The company may also build more factories in Thailand and China to meet rising global demand for gloves.

Top Glove has allocated some RM70 million for capital expenditure (capex) in the current financial year ending Aug 31, 2010, to finance the CONSTRUCTION [] of two factories in Malaysia with a combined annual capacity of three billion pieces of gloves.


This article appeared in The Edge Financial Daily, October 19, 2009.