MARC Ratings has affirmed its ratings on funding vehicle TG Treasury Berhad’s RM3.0 billion Islamic Medium-Term Notes (IMTN)/ Perpetual Sukuk Programme at AA-IS(cg)/AIS(cg). The outlook on the ratings is stable.
The IMTN/ Perpetual Sukuk carry an irrevocable and unconditional guarantee from TG Treasury’s parent Top Glove Corporation Bhd (Top Glove); therefore, the senior-ranked IMTN rating reflects the corporate credit rating of the parent company. Top Glove’s market position as a key global glove manufacturer, its well-established operating track record, and strong liquidity position remain key rating drivers. The corporate credit rating is mainly moderated by the prevailing weak pricing environment for gloves and the low profit margins that provide limited buffers for cost increases.
For the first half of financial year ending August 31, 2025 (1HFY2025), revenue rose 69.5% y-o-y to RM1.8 billion, supported by customers’ ongoing restocking activities and a sharp rise in orders from Europe as China glove makers ramped up sales to the US prior to the tariff increase on imports from the country. Its glove sales grew to 19.5 billion pieces during 1HFY2025 from 11.0 billion pieces in the previous corresponding period. In addition to improved demand, projected to grow by 8.0% p.a., Top Glove’s performance was also supported by reduced production capacity by established players through decommissioning of plants as well as the exit of new entrants. Its utilisation level rose to 58% in 1HFY2025 from 44% in FY2024.
These factors notwithstanding, MARC Ratings notes that the selling prices of Malaysian gloves have remained below pre-COVID levels due to slow price recovery from the prevailing stiff competition in the industry, mainly from China. The comparatively higher import tariffs recently levied on China products by the US would benefit domestic glove players such as Top Glove. Operating profit before interest, tax, depreciation, and amortisation (OPBITDA) of RM222.8 million and cash balances of RM579.7 million as at end-1HFY2025 provide strong capacity to meet operational requirements and financial obligations. Additional potential non-strategic land disposals worth up to RM234 million, and the full exercise of a bonus issue of warrants that would generate proceeds of about RM510 million over a five-year period, would strengthen liquidity position.
Proceeds of RM800 million from the first issuance of IMTNs under the programme were utilised to partially meet the repayment of the RM1.18 billion outstanding under the Perpetual Sukuk Programme of sister company TG Excellence Berhad on the first call date of February 27, 2025. The remainder was met by utilising internal funds. TG Excellence’s Sukuk Programme has been subsequently cancelled. Top Glove’s consolidated borrowings stood at RM1.2 billion as at end-1HFY2025, translating into low debt-to-equity (DE) of 0.25x and net DE of 0.13x.
The two-notch rating differential between the senior rating and the Perpetual Sukuk rating reflects the subordination of the latter’s obligations to Top Glove’s senior unsecured obligations, in line with MARC Ratings’ methodology.