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TOPGLOV (7113) - Technical And Fundamental Analysis

Technical Analysis


- TOPGLOVE completed double top reversal which reflected a strong selling pressure on shares price on Jan 1, 2019.

- It tried to bounce back and challenged resistance @ RM5.020 but shares price unable to sustain above RM5.020 for 4 trading days. Thus, it is considered as a fake break out.

- EMA 20, 60, 120 shows downward trend which cause more selling pressure on TOPGLOV shares price. Besides, it decreased more than 20% from highest shares price (RM6.310) and it implied TOPGLOV enters a bearish trend.

- From Elliot Triangle Wave perspective, TOPGLOV need to fall until +/- RM4.089.

- If we count from double top reversal, it need to further fall to RM3.806 and enters a long consolidated period for next re-bounce. Estimated 6-9 months.

- Resistance level, R2: RM5.100

- Resistance level, R1: RM4.650

- Support Level. S1: RM4.089

- Support Level S2: RM3.806

Fundamental Analysis


a) Market Prospect Ratio

- TOPGLOVE EPS decrease significantly by -35% (YoY) and it have a great impact on shares price movement.

- However, it declares 12 cents (70.71% EPS) and it is the highest in the past 5 years. Average payout ratio around +/-50%.

- Good dividend payout is great news to investor but it will have a negative impact on company future performance due to lesser capital/cash for future technical breakthrough.

b) Profitability ratio

- Gross Margin and Profit margin sustain at 20% and 10% respectively despite higher price in major raw material (Natural Rubber latex price and Nitrile Latex price). TOPGLOV able to channel higher production cost to customer by increasing their average selling price (APS).

- Decrease in ROA and ROC due to M&E activities in Y2018. Long-term assets increase by 116%. It is in line with TOPGLOV's direction. They acquired Aspion SB and Duramedical SB

c) Efficiency Ratio

- Receivable increase by +54% (YoY: Y2018-Y2017) which records highest in past 5 years. It impact account receivable turnover ratio and lower company's efficiency.

- It is majorly contributed by third parties trade receivable with RM625M in Y2018. TOPGLOV might increase their credit term to sustain sales and protect their markets shares.

- Furthermore, lower inventory turnover and highest Days' sales in inventory reflect slower sales generation and post a doubtful on company performance.

d) Liquidity Ratio

- Due to latest M&A activities and dividend payout, TOPGLOV cash and cash equivalent decrease significantly on YoY basis.

- The situation might lead TOPGLOV lower down dividend payout in future.

e) Solvency Ratio

- Increase in borrowing level due to M&E activities.

- Although M&E activities will increase company performance in term of business diversify, over-expand in business module with higher gearing will lead tight company cash flow and higher interest payable but it is short-term effect only.

- There is 40% of short term borrowing will mature in a year. Thus, it will further improve borrowing level.

- Higher loan mature in short term will impact company cash flow and affect company growth in short term.