Some of our friends requested for opinions on TOPGLOV (7113) and we are more than happy to share it with everyone. Disclosure: I/We do not have any positions in Top Glove and do not intend to initiate positions until share price of Top Glove reaches a rather cheap valuations. The information below is for sharing purposes without any understanding of investment targets and needs of readers. References to the price movements and fundamentals data is informational based on my analysis and data obtained from sources believed to be reliable at the point of writing.
Summary of Red Flags:
- Potential ringgit strengthening against USD to 3.95 - 3.86 range will further erode Top Glove's net margin despite maintaining/improving the revenue (Image 1)
- On going litigation between Top Glove Corporation Bhd and Top Care Sdn Bhd against Adventa Capital Pte Ltd which may last until end of 2019
- Higher days of inventory and lower inventory turnover based on Top Glove's report which could signal overcapacity in the glove markets (Image 2)
- Current share price signalling selling pressures since the high of RM6.36 and has been going downwards since then. A failed attempt to break above RM5.20 (down-sloping neckline; unusually weak) on 20-Feb further signaled that bear is taking over (Image 3)
- Overall KLSE Main Market Health Care Sector Median PE ratio at 24.68 while Top Glove's PE ratio is at 27.29. Current Price/Book of Top Glove is at RM4.9 versus 5 years average of RM3.70
 |
| Image 1: USD/MYR Potential Trends Pointing to MYR Strengthening |
 |
| Image 2: Top Glove Inventory Management Performance |
 |
| Image 3: Price Actions of Top Glove |
Possible trade setups as below:
Aggressive Trader/Investor:
Entry Price: RM4.22 +/- 3%
Stop Loss: RM3.60 and below
Exit: According to your target rate of returns / the levels in the chart (image 3)
Conservative Trader/Investor:
Entry Price: Watch for reversal at RM4.22 / RM3.60. Reversal as in price going below the levels and rebounded above.
Stop Loss: Either RM4.22 (if entry above RM4.22) or RM3.60 (if entry above RM3.60
Exit: According to your target rate of returns / the levels in the chart (image 3)
Congrats to those who were aggressive enough to buy in at $4.22 +/-3% :)
ReplyDeleteI will still categorize the last two days rebound as technical correction from an oversold situation. Watch for rebound towards the $4.72 +/-3% region. If it fails to close above $4.72 with high volume, you can still take profit at $4.60 which will give you approximately 6% gain when it resume its major downtrend.
TopGlove attempted to break $4.72 but failed. Do monitor the price action closely.
ReplyDeleteA good entry for Top Glove will be when MYR strengthening towards the 3.90 exchange rate. Do take note of the price convergence between Harta and Top Glove. We should be seeing divergence soon.
ReplyDelete