However, the glove maker’s upward momentum appears to have run out of steam, according to a technical note yesterday from Hong Leong Investment Bank (HLIB).

Since April 13, glove stocks have been gradually trending downwards. Top Glove saw 11.3% trimmed from its share price, with peers Hartalega Holdings Bhd (-7.5%), Supermax Corp Bhd (-14.9%) and Kossan Rubber Industries Bhd (-7.2%) following close behind.

The last five trading days have seen share prices dip slightly, with Top Glove down almost 1%, Hartalega (3.4%) and Supermax (3.9%). Kossan Rubber was narrowly spared, seeing a marginal rise of 0.8%.

However, HLIB has an ominous warning for glove stock investors. “A further correction (to Top Glove’s share price) is imminent based on the worsening indicators,” it said, advising investors to cut their losses at RM1.19.

“A decisive break down below the RM1 physiological level will dampen the share price toward 91 sen-87 sen-76 sen.”

The market consensus expects Top Glove to remain loss-making in the upcoming two quarters, with the bleak prospect of the group’s cash pile decreasing further.

Top Glove’s net cash level stood at a relatively low level of RM270 million or 3% of its market capitalisation, the lowest among its peers.

This compares with Hartalega Holdings Bhd’s cash and cash equivalents of RM1.93 billion as at end-2022, Kossan Rubber’s RM1.35 billion and Supermax’s RM2.61 billion.

Weathering the storm

PublicInvest Research expressed concern about Top Glove’s ability to weather the storm in a recent note.

“Top Glove has the lowest net cash, hence making it more challenging for it to endure a prolonged period of overcapacity condition in the market.

“Note that Top Glove is now operating at a low utilisation rate of 30%. In order to break even, it would need to raise average selling prices (ASP) further by about 10%, in addition to running at a utilisation rate of at least 60%,” said PublicInvest.

However, utilisation rates are likely to remain subdued due to existing overcapacity and short lead time.

The two research houses are in agreement that the upward revisions to the manufacturer’s average selling prices will have a subdued positive impact.

“Although pricing adjustments have been made, they are still not sufficient to fully cover the cost increases driven primarily by higher natural gas prices (+15%) and electricity tariffs (+5.4 times),” said HLIB.

The group faces intense competition from Chinese players, whose gloves are being sold at a discount to that of Malaysian peers.

As of April 20, among financial analysts polled by Bloomberg, 15 of them have given “sell” ratings, while five have “hold” and two others “buy” recommendations, with a consensus target price of 70 sen.

At the close yesterday, Top Glove’s share price was up 2% or 2 sen to RM1.02, giving it a market capitalisation of RM8.29 billion.