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In a recent press conferrence, Top Glove Corp Bhd, the world’s largest rubber glove manufacturer, says orders for its products have picked up since last month, and expects the momentum to continue.

Executive director Lim Cheong Guan projected revenue for the third quarter ending May 31 to be higher than the preceding quarter.

“The percentage of increase would be about the same as the second quarter over the first quarter,” he told a press briefing yesterday.

“Due to closure of some competitors (as a result of the global financial crisis), some big buyers have come to us,” he said, adding that increasing awareness of healthcare and government spending in the Middle East, China, India and Brazil had also helped boost demand.

Managing director Lee Kim Meow said that the reduction of electricity and natural gas prices, effective March 1, would cut production cost by 3%.

Top Glove will also appeal against the extra levy charges on foreign workers, which would cost the company an additional 0.5% in operation cost.

Recently, Top Glove obtained the Brazilian National Standards Organisation certificate, which is responsible for technical standards in Brazil.

The company planned to grow its market share in Brazil to 40% this year from 30% now. Currently, the company exports US$3mil to US$4mil worth of products, or about 50 containers per month, to Brazil.

Top Glove will maintain a 30% dividend payout ratio for the financial year ending Aug 31 (FY09). Total capital expenditure for FY09 is expected at RM60mil, where RM44mil had been spent during the first half.

The company has a very healthy balance sheet with a net cash of 5.3%, or RM39.6mil, compared with its peers, with some having up to 90.5% gearing ratio.

Over the last 10 years, Top Glove had been growing at an average of 30% compounded annual growth rate.

Asked whether the company would aggressively make acquisitions amid its healthy cash flow, chairman Tan Sri Dr Lim Wee Chai said the company would be cautious.

“Although we have pressure to grow, stability is more important. It is easy to acquire a company using cash but to maintain profitability is not easy,” he said.

He also ruled out diversification into the condom business, saying: “Condom needs a different set of skills although the technology is quite similar. Bottom line (net profit) is more important than top line (revenue).”

Top Glove has 17 glove factories and two latex concentrate plants, operating 339 production lines with a production capacity of 30 billion pieces of gloves per annum.

Its two latex concentrate plants in Thailand supply 50% of its latex concentrate materials. – The Star

Related Posts:

• Top Glove expanding its business
• Top Glove Doubled Quarterly Profit

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This is part II of Understanding Bond Funds. You can view part I of understanding bond funds to find out what type of bond available.

What are bond funds?

Bond funds are portfolios which “pool” money from different investors to invest in bond instruments. These funds are established and managed by fund management companies. They invest mainly in government bonds as well as corporate bonds, depending on an established investment guideline.

It would be difficult fot individual investors to access the bond market directly as there is a need for minimum standard trading lots. In Malaysia, this standard trading lot is RM5 million. By “pooling” money from a wide spectrum of investors, bond funds provide avenues for individual investors to invest in such instruments, in smaller amounts.

Why invest in bond funds?

Some of the key advantages of investing in bond funds are:

1. Professionally managed

Bond funds are managed by professional fund managers who are well-trained and have a proven track record in analysing the interest rate outlook and creditworthiness of bonds. Large bond fund managers usually have in-house economics and credit teams to assess macro outlook and credit standings of the various bonds in the market.

2. No fixed maturity date

While individual bonds have fixed maturity dates, open-ended bond funds do not have fixed maturity dates as fund managers constantly rebalance the portfolios. Therefore investorts need not worry about re-investing their money.

3. Regular income

Most bond funds offer investors regular income distributions derived from the coupon income generated by the underlying bonds in the portfolio. Thus, bond funds give investors a stable, regular income.

4. Automatic income reinvestment

Investors who are not in need of regular income could opt for automatic  income reinvestment. This option allows income distribution from the bond funds to be reinvested automatically in the fund which gives the investor more units.

5. Liquidity

Investors are free to redeem units of a bond fund at the current net asset value (NAV) of fund. Bond funds provide liquidity and convenience as investors could buy or sell their units every day. Investors could redeem their units without having to wait for each bond to mature.

6. Diversification

Bond funds provide diversification to investors as they invest in wide spectrum of bonds. This reduces the risk of over-exposure to any single bond.

We at Pro Trade Shares hope the last two articles on bond fund were beneficial.

Related Posts:

• Understanding Malaysian Bond Funds – part 1