PETALING JAYA: Top Glove Corp Bhd has clarified that its proposed listing on the Hong Kong Exchange (HKEX) Main Board, despite its substantial cash reserves, is meant to capitalise on the optimal conditions for fundraising via equity as opposed to doing so in the future, when market factors and conditions as well as high funding cost might make it undesirable.
According to its executive director, Lim Cheong Guan, its share price is currently at a sweet spot for the listing.
“The group’s share price is not at its peak which will deter new investors; it is at a higher level than it was pre-pandemic, which is fair to the majority of our existing long-term shareholders,” he told the media at a virtual briefing on its second-quarter 2021 (Q2’21) results on Tuesday.
Top Glove shares ended at RM5.19 on Tuesday, 15 sen or 2.98% higher, with 43.9 million shares done.
Lim said proceeds raised from the Hong Kong listing exercise will be put towards its ongoing organic expansion plan to increase its capacity as well as for the development of a new nitrile raw material plant.
For the next five years, from FY2021 to FY2025, Top Glove estimated a total capital expenditure of RM10 billion .
“In addition, the group will continue to look at opportunities to grow its business via strategic business expansion or acquisitions. Readily available funds will put Top Glove on stronger negotiation footing,” said the executive director.
As for its strong cash surplus, he stated that it will be used to reward existing shareholders as the group intends to increase its dividend payout to 70% for Q2’21 to Q4’21 as announced previously.
The group disclosed that the listing on HKEX is expected to be completed between May and June this year and it will raise up to RM7.7 billion from new share issuance.
Top Glove’s managing director, Datuk Lee Kim Meow, estimated the exercise will translate into a 13.96% dilution impact for its base offering of 1.3 billion new shares against the enlarged share capital, excluding treasury shares.
Should the greenshoe or over allotment option of up to 1.495 billion new shares be exercised in full, the dilution impact is estimated to be at 15.72% based on the enlarged shares.
“The proposed dual primary listing on HKEX will provide us with an additional platform with more financing flexibility. This will create an additional platform to be traded via another established and larger stock exchange,” he said.
Lee pointed out that compared with Bursa, HKEX’s market capitalisation as at March 5 is 15 times larger at US$6.75 trillion (RM27.7 trillion) against the local bourse’s US$440 billion and 10 times larger than Singapore Exchange’s US$660 billion.
For its second quarter ended Feb 28, 2021, Top Glove posted a record quarterly net profit of RM2.87 billion, a more than 24-fold increase from RM115.68 million in the same quarter of the previous year, on the back of higher sales, utilisation levels and higher average selling price.
Revenue for the quarter stood at RM5.37 billion, a 336% improvement from RM1.23 billion previously.
Lee commented that it is pleased to deliver a strong performance for the second quarter.
“Our unprecedented performance also speaks to the effectiveness of our ongoing technology driven improvement initiatives, which focus on quality and cost efficiency, and have enabled us to meet the increase in glove demand efficiently and effectively,” he said.
For the six-month period, Top Glove’s net profit stood at RM5.23 billion, a 23-fold jump from RM227.11 million in the corresponding period of the previous year.
Meanwhile, revenue for the period rose by 415% to RM10.12 billion from RM2.44 billion registered previously.
With that, Top Glove has declared a second single-tier dividend of 25.2 sen per share, comprising a special dividend payout of 20% along with the 50% as per its dividend policy. The dividend will be paid out on April 6. The total dividend declared for first-half FY21 of 41.7 sen per share, represents a 253% increase from the full year dividend for FY20 of 11.8 sen per share.
