'Where are people using rubber gloves anymore now, there are rubber socks.'
Due to oversupply factors and a sharp drop in the average selling price (ASP) in the rubber glove industry, Top Glove shares fell to a 6-year low.
Yesterday, Top Glove shares fell to 59 sen which is the lowest level since September 2016 and the year-to-date record has declined 77% from RM2.74 on 31 December 2021.
This not only made Top Glove lose RM16 billion in market capitalization within 9 months, but also caused a 27.72% decline in the value held by founder Tan Sri Lim Wee Chai at RM4.44 billion.
For the record, Top Glove once reached the highest peak at RM7.58 during the past 2 years and became the 2nd most active trading counter of Bursa during the Covid-19 pandemic.
Based on those factors, RHB Research analysts voiced concerns about the decline in ASP and the suboptimal capacity utilization of Top Glove could continue to impact production margins.
He explained that in the near future players in the local glove industry may have to postpone the production of their new products as demand will continue to decline.
Also highlighted is the inventory of gloves which is seen to be still high 30% to 50% of the pre-pandemic level which is expected to take at least a year before abating.
In addition, Kenanga Research analysts also expect Top Glove to experience a bearish phase and predict the company will need more than 2 years to balance inventory to pre-pandemic levels.
As of this writing, Top Glove shares continued to shrink by 2.54% at 57 sen with a market capitalization of RM4.6 billion.
