KUALA LUMPUR: Glove maker Top Glove Corporation Bhd posted another sterling set of results, with net profit doubling to RM70.53 million in its second quarter ended Feb 28, 2010 (2QFY10) from RM36 million a year earlier as it captured additional market share, particularly from the emerging countries, and benefited from cost-saving measures.

Revenue jumped 47% to RM510 million from RM346.5 million as the group embarked on aggressive marketing strategies to maintain its world No 1 market position. Basic earnings per share (EPS) rose to 23.54 sen from 12.22 sen. No dividend was proposed for 2QFY10.

Top Glove announced it had revised its target dividend payout ratio to 40% of its net profit, compared with a 30% ratio in previous years.

For the six-month period, Top Glove's net profit surged 93.5% to RM135.73 million from RM70.16 million a year earlier, while revenue came in at RM982.2 million, an increase of 34% from RM732.6 million. EPS rose to 45.43 sen from 23.83 sen.

In a statement on Wednesday, March 17, Top Glove's chairman Tan Sri Lim Wee-Chai said it had forged ahead strongly with specific efforts undertaken to improve and innovate its glove quality, marketing strategies, productivity enhancement and cost efficiency.

"With the group achieving strong profit growth for the first half of FY10, it will continue to be optimistic of its outlook despite ongoing challenges such as the increase in raw material costs and weakening of the US dollar.

"With a large customer base spread over more than 180 countries and with a diversified range of good quality products, the group is confident of continuous growth and good profitable performance in this financial year ending Aug 31, 2010," he said.

Top Glove said its balance sheet position strengthened further with a net cash position of RM269.8 million and free cash flow of RM106.2 million for the period ended Feb 28, 2010.

In a note on Wednesday, OSK Research said Top Glove's 2QFY10 results reflected the strong demand for rubber gloves and the company stood to benefit from this continuous strong demand following its expansion drives.

"The demand for examination gloves continues to be strong in 2QFY10 despite the rise in latex price to an average of RM6.49 per kg during the quarter. The continuous strong demand had enabled Top Glove to fully pass on the latex cost increase to its customers in a timely manner.

"Also, there was a slight increase in glove output following the higher utilisation rate of its new lines. We continue to like the company for its market leadership position and having a good product mix targeting the right market," said OSK.   

The research house also commended Top Glove for having the right product mix of 80% natural rubber gloves, which is the basic entry for examination gloves targeting the developing countries.

"Traditionally, developing countries such as Brazil have proven to give significant sales boost to the rubber glove companies once their government implemented the compulsory usage of gloves in their healthcare sector," said OSK.

OSK sets a target price for Top Glove's shares at RM15.15 apiece, based on price-earnings ratio valuation of 17 times FY11 EPS, a premium to the 15 times industry average due to its market leadership share of 22%. Top Glove's shares jumped 26 sen or 2.1% to close at RM12.56 on Wednesday, with 2.73 million shares done.

It share price has risen by 25.12% so far this year, compared with the 2.17% increase in the FBM KLCI.