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Top Glove shares edge higher on packaging materials deal

$11m purchase will help Malaysian glove maker save costs

Top Glove's headquarters in Kuala Lumpur. (Photo by Keiichiro Asahara)

KUALA LUMPUR -- Shares of Top Glove finished 3.7% higher at 6.63 ringgit on Monday, following the Malaysian company's announcement on Friday of its 46.25 million ringgit ($10.92 million) purchase of a packaging materials company. 

Top Glove sealed a sales and purchase agreement with locally incorporated Eastern Press, in a move that the world's largest manufacturer of natural rubber gloves said would improve its "supply chain coordination and cost control." The deal is also in line with the group's business plan to produce "high quality gloves at low cost."

Analysts have reacted positively to the 100% purchase of Eastern Press, which has been a major supplier of packaging materials to Top Glove.  

CIMB Research said the acquisition was "value-accretive", as box packaging will account for about 3% of Top Glove's costs in fiscal 2017.

Top Glove has projected that the acquisition, when completed by next March, will result in annual cost savings of 4.5 million ringgit. 

There will be synergies to the proposed transaction, wrote Kenanga Research in a note to investors, which will allow for more flexible planning and improved delivery time in relation to the supply of packaging material for its glove products.

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