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TOPGLOVE: IB & Brokerages Fear To Allocate PE>10 for 2021 Earnings

The question is why Investment Banks in Malaysia and Brokerages are allocating PE of 10 and below for Topglove 2021 earnings

Note: This same treatment applies to Hartalega, Kossan and Supermax.

Special mention to Lee Yen Ling @ Maybank

After her Zoom meeting in June 2020, it seems Maybank Kim Eng is all but praises for Topglove earnings in the next 1-2 years.

However, her recently Target Price of RM9.53 at PE=7 for 2021 earnings forecast of RM11billion (PAT) is all but surprising.

Special mention to Walter Aw @ CIMB

Similarly, his admiration for Topglove back in June 2020 seems to take a u-turn now as he allocated PE=8 for 2021 earnings of RM10billion (PAT).

Maybank & CIMB are analyst are among top IBs in Malaysia when valuing the local Bursa Market. Any buy/sell call from these IBs can move markets and are considered bellwether of the financial market.

It seems not only both of them are fearful to allocate PE greater than 10 for 2021 earnings but other familiar IBS and brokerage such as MIDF, Kenanga, RHB, HLG, AMinvest, Public Bank, etc

The questions is why back tracked after so much rating and re-rating on May 2020 onwards.

Bosses from Topglove and other glove manufacturers like Hartalega, Kossan, Supermax,etc are painting a bullish year for 2020 onwards. They even mentioned that demand will superceed supply in the next 2-3 year. Raw material such NBR is in shortages evidence by the increase in NBR price in Aug 2020 by 3%.

Perhaps IBs are fearful of supernormal profits and assigning a higher PE than 10 for the top 4 glove  manufacturers may look foolish in the public just in case the earning forecast did not materialise.

The best part of these IBs and Brokerages, they tend to rate and re-rate as variables changes in the span of a few weeks. It seems nowdays, IBs and Brokerage analyst are spineless as their goalpost(TP) move every few weeks.