December 22, 2021: -Shares of Top Glove, the largest medical glovemaker in the world, have erased much of their gains notched in the Covid-19 pandemic as analysts turn more pessimistic on the company’s outlook.

Top Glove’s shares on the Malaysian stock exchange have tumbled by over 60% this year to close at 2.20 Malaysian ringgit on Monday.

That’s 77% off the stock’s record-high closing price reached on October 19 last year, and around 0.70 ringgit higher than its final traded price in 2019 — before Covid spread globally.

Several analysts have downgraded the stock. The latest data on Refinitiv showed that 11 out of 23 analysts rated Top Glove as a “sell” or “strong sell,” an increase from six such ratings a month ago.

One analyst who downgraded Top Glove from “hold” to “sell” is Ng Chi Hoong, a Malaysia-based Affin Hwang Investment Bank analyst. In a report last week, Ng said that its latest quarterly results were “relatively weak,” while it is upcoming listing in Hong Kong would weigh down the share price.

Top Glove reported a net profit of 185.7 million Malaysian ringgit for the quarter ended November, a 92% decrease from the same period a year ago. The company said sales volume came down because of the increased competition and supply, while average selling prices have decreased from last year’s peak levels. 

A few days before the earnings release, Top Glove said it received shareholders’ approval for a dual primary listing in Hong Kong, which it expects to complete early next year. Currently, the company has a primary listing in Malaysia and a secondary list in Singapore.

Analysts are warning that the Hong Kong listing would dilute Top Glove’s earnings per share. The concerns contributed to the fall in the company’s share price this year.    

“Recent channel checks have suggested pricing power shifting back to the buyers,” JPMorgan said in a report earlier this month, adding that “demand had waned from peak pandemic levels while supply from China and Thailand is continuing to flood the market.”

The weak outlook for glove stocks is why the Wall Street giant has an “underweight” recommendation for Malaysia for 2022.

An underweight position reflects an investor’s view that the market or stock will underperform.