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12-May-13 Nguyen Canh Duong (22189467)

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1. conditions and compliance.20 billion as at 09 April 2013. Bursa Saham Kuala Lumpur on 27 March 2001. having said that. capacity. the company has undertaken a rapid expansion of its capacity. which include character.1 Company: TOP GLOVE CORPORATION BHD Established in 1991 with only one factory and three production lines.0 million and would take 2 years to complete and commission.6 million as at financial year ended 31 August 2012.7 million with an annual turnover of about RM2. Top Glove has since grown by leaps and bounds to become the world's largest rubber glove manufacturer.800 customers in over 185 countries through its sales and marketing offices in Malaysia. The new facility is expected to cost the company RM20. t was listed on the Malaysian bourse. (Top Glove has a shareholder fund of RM1. analysis has been carried out to determine the eligibility of Top Glove Berhad for the loan as requested. Top Glove Berhad. In a short span of slightly more than a year. FBM Top 100 Index and FBM Emas Index with a market capitalization of RM3. Thailand and China grew from 5 in 2001 to 24 presently.0 INTRODUCTION This report explores the credit appraisal of a public listed company in the main board of Bursa Malaysia. the United States and Germany. fittings and machineries. Top Glove Berhad intents to expand its production capacity by building a new facility.28 billion or USD409.67 billion or USD1. Top Glove Corporation Berhad's listing was successfully promoted from the Second Board to the Main Market of the Kuala Lumpur Stock Exchange.0 COMPANY PROFILE 2. Its manufacturing facilities which spread across Malaysia. collateral. which would include a new plant. This credit appraisal report analyse its financial performance for the past 3 years as well as the 6 C’s of credit evaluation. captial.31 billion or USD740. 3 .) In line with its objective of capturing a larger share in the world market. on 16 May 2002. 2. Top Glove exports to approximately 1. It is also one of the component stocks of the FTSE Bursa Malaysia ("FBM") Mid 70 Index.

6 The business of the company manufacturing rubber glove manufacturer The organizational structure 4 . To strive to be the World’s leading manufacturer with exellent quality glove products and services that enrich protect human lives.2.4 Date of incorporation 27 March 2001 Duration of existence 23 years (1991-present) Objects of the company To produce consistently high quality gloves with efficient low cost.5 2. 2.2 2. To earn 2 healthy dollars and spend 1 efficient dollar.3 2.

71 Authorized capital: RM400 million or USD106.788.481 5 .7 Capital structure 2.72 Paid up Capital: RM309.2.8 million 2.

) Economics and Statistics from University of Wales.Chairman of Top Glove Corporation Berhad. Selangor in 1954. established in 1991 and was listed on Bursa Malaysia Securities Berhad on 27 March Tan Sri Dato’ Seri Arshad Bin Ayub. Sul Ross State University in Texas. Position and Shareholding Tan Sri Lim Wee Chai. Serdang. Aberystwyth. Switzerland in 1964. • • • • 2001. • • The BrandLaureate Brand Icons Leadership Award 2011 Outstanding American Alumnus Award of Malaysia in 2012. Malaysian Manufacturers (FMM) in 2010 and in 2011. • served as the President of the Malaysian Rubber Glove Manufacturers’ Association (MARGMA) from 1997-1999.2. 6 . Lausanne. he served as the Vice-President. Prior to that.Independent Non-Executive Director • • • Diploma in Agriculture from College of Agriculture. Corporation Bhd on 4 September 2000. Council (EABC) by the Minister of International Trade and Industry Malaysia.8 Board of Directors. United Kingdom in 1958 obtained a postgraduate Diploma in Business Administration from Management Development Institute (IMEDE). Honorary Secretary and Treasurer of MARGMA for the past seven years. Bachelor of Science (Hons. United States. was also the Director of the Association of Malaysia Medical was elected as a Council Member of the Federation of appointed as Council Member of The East Asia Business prestigious accolade Master and Country Entrepreneur of Entrepreneur of the Year at the Asia Pacific Entrepreneurship Industries (AMMI) and Board Member of the Malaysia Rubber Board in 1998 and 1999. • • • • • Awards 2008. by Ernst and Young in 2004 graduated with a Bachelor of Science Degree with Honours in Obtained his Master of Business Administration in 1985 from Aged 54 was appointed as the Chairman of Top Glove founder of Top Glove Group of Companies which was Physics in 1982 from University Malaya. Malaysia for the Year.

Independent Non-Executive Director • graduated from the University of Malaya in Singapore. IMF Institute (Washington DC). Chairman/President and CEO of Pacific Bank Group Deputy Governor of Bank Negara Malaysia Member of the Prime Minister’s Economic Council Working Group Member of a number of key National Committees on Higher Education. • • • • • Is an independent strategic and financial consultant and a British Chartered Scientist. also professionally qualified in UK as a Chartered Statistician. Associated Chinese Chambers of Commerce and Industry of Malaysia. • sits on the Boards of several public listed companies in Malaysia including Fraser & Neave Holdings Berhad Lee Kim Meow.Managing Director 7 . including a PhD in Economics. subsequently received three postgraduate degrees from Harvard University. and he is also Fellow of The Royal Statistical Society (London). and Economic Advisor. Member of Justice Harun’s Salaries Commission for statutory bodies. Chairman of PFM Capital Holdings Sdn Bhd and Zalaraz Sdn Bhd (a family company) Tan Sri Dato’ Dr. and Professor of the Business & International Finance (Adjunct) at Universiti Malaysia Sabah. Lin See Yan..• • • • • • Deputy Governor of Bank Negara Malaysia (1975 – 1977) Deputy Director General in the Economics Planning Unit of the Prime Minister’s Department (1977 – 1978) Secretary General in the Ministry of Primary Industries (1978) Ministry of Agriculture (1979 – 1981) and Ministry of Land and Regional Development (1981 – 1983). an US Eisenhower Fellow. Professor of the Economics (Adjunct) at Universiti Utara Malaysia.

• • banking industry in the information technology field for more than ten (10) years. and a Bachelor of Law Degree from the University of London. Puan Sri Tong Siew Bee. USA in 1990. PA. Master of Business Administration Degree (Minor in Applied Statistic) from Arizona State University. Penang in 1983 and later obtained her Master of Business Administration from Sul Ross State University. USA in 1985. majoring in Accounting. Lim Hooi Sin. board member of the Malaysian Rubber Board (MRB) and the Tun Abdul Razak Research Centre (TARRC) from 2010 to 2011. both are the Directors and Substantial Shareholders of the Company.• Bachelor of Commerce Degree from the University of New South Wales.Executive Director • Bachelor of Science Degree with Honours in Computer Science from University Sains Malaysia. USA in 1986 and Charter Financial Consultant Diploma from American College. Texas. She was formerly attached to United Overseas Bank Berhad and Utama Bank Berhad. 8 .K.Executive Director Bachelor of Science Degree in Management Science from Oklahoma State University. immediate past President of the Malaysian Rubber Glove Manufacturers’ Association (MARGMA) currently. Australia. pouse of Tan Sri Lim Wee Chai and sister-inlaw of Mr Lim Hooi Sin. one of the largest insurance & financial services company in the US. the Secretary General of the Asean Rubber Glove Manufacturers Association (ARGMA) also served as a Board member of the Malaysian Rubber Export Promotion Council (MREPC) since 2002. • • • • • 15 years in established financial institutions and with a well known conglomerate with diversified interest in the Asean region. USA in 1985. Finance and Information System. U. fourteen (14) years of his career with MetLife Financial Services.

Lim Cheong Guan. Agency Director and Director of Asian Market. • Currently. a position he held until 1983. Associate Branch Manager. Inc. was with the Public Works Department as the Technical Assistant of Waterworks until 1959 Assistant Resident Engineer. Director of AAAA (Arizona Asian American Association).was a Management Trainee. Sekarajasekaran a/l Arasaratnam. graduated with a Diploma in Public Health Engineering from the Imperial College of Science & Technology. Mr Lim is also a Director of Malaysian Investor Relations Association Berhad (MIRA) and Advisor to the Management Committee of Top Glove Foundation. United Kingdom in 1968. Kuala Lumpur.Executive Director • • • Graduated from University of Malaya with a Bachelor Degree in Accounting in 1990. 9 . which the business activities spanned over manufacturing. Executive Engineer and Waterworks Engineer from 1960 to 1966. Ministry of Health in 1968 as a Senior Public Health Engineer and was promoted to Chief Public Health Engineer in 1972. member of Malaysian Institute of Accountants and Malaysian Institute of Certified Public Accountants. trading and property development.Independent Non-Executive Director • • • • • • • Diploma in Civil Engineering in 1951 from Technical College. Founder of TG Medical USA. Lim Han Boon. began his career with Price Waterhouse in 1990 and subsequently held various key positions in a number of public listed companies in Malaysia.Independent Non-Executive Director • An accountant by profession and is currently managing his own business. Regional Marketing Specialist. in 1994 with vast experiences in the United States glove market. plantation. passed the Membership Examination of the Institution of Civil Engineers (ICE). In 1980. United Kingdom. he was the Director of Engineering Services.

• • Eld various senior positions in a few companies listed on the Main Market and ACE Market of Bursa Malaysia Securities Berhad. As more than twenty (20) years of experience in areas of transport and maritime logistics industry having worked for Kontena Nasional Berhad. • A member of the Malaysian Institute of Accountants. a Chapter of PIKOM. Australia. the National ICT Association. United Kingdom. Northport Malaysia Berhad and NCB Holdings Berhad. the Chartered Management Institute. A committee member of Outsourcing Malaysia. fellow of the Association of Chartered Certified Accountants. attended the Harvard Business School Senior Management Development Program. 10 . United Kingdom • • • holds a Master of Business Administration Degree from the University of South Australia. Kannaltec Berhad.

William C.0 The Financial Performance Financial highlights 11 . Tan Major Bankers: • • Ambank Berhad Malayan Banking Berhad 3. Ernst & Young and Messrs.10 Bankers and Auditors The external auditors are Messrs.H.2.9 Senior Management 2.

41050.1 The proposed project In order to meet the rapidly growing demand from international market. which would include a new plant. Title no: Lot no : NC 12345 4968 12 . fittings and machineries. Selangor D. Off Jln Meru. Top Glove Corporation Bhd aims to expand its production capacity by building a new facility. The new facility is expected to cost the Top Glove Corporation Bhd RM20. 4.***Details at appendix 1 & 2 4. 6th Miles.E.0 million and would take 2 years to complete and commission.0 The Proposed Project 4. Klang. Malaysia.2 Location: Jln Teratai.

Highly.Mukim: Land area: Ownership: Land condition: Encumberances: Damansara 1. LDP.2 hectare free hold commercial NO 4. Sime Darby Medical Centre Ara Damansara. It is strtegically located.3 Description of proposed project site: The project site was acquired by Top Glove Corporation Bhd in 2010. following the success of the project site. Flat land. Easily accessible from major highway – North Klang Valley 5.000 13 . Expressway.The project is called “Factory 11”. Kulala Lumpur – Shah Alam Expressway (KESAS).1 Total cost of project: Total cost of “Factory 11” includes only land refinishing and construction cost as the land has been acquired earlier as mentioned in 4. bringing in employment opportunity for the locals and improving living standard in the region as well. Top Glove Corporation Bhd is confident that this will be another success.3. Following is the cost breakdown: Categories Material Labour Proportion (%) 60% 40% RM 12.000 8.000. Federal highway.0 Capital & Financials 5. close to Subang Skypark Terminal.000.

5.000 14 .3 Returns from proposed project **note: project has 2 phases.No.000 20.000.2 Financing of proposed project: 70% equity. 30% debt No. 1 2 % of financing Equity Financing Debt Financing Proportion of Financing (RM) 14.000 and should not exceed this amount.) Cost (RM) 14. 1 Items Unit (no.000.000 5. Each will cost RM10. the estimated total cost is RM 12.000.000 6.000.000 Construction of 1 main buildings 2 Total Miscellaneous 1 6.000 Therefore.000.000.500.

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6. 16 .0 Capacity 6.3 Tenure of loan: 7 years Sources of repayment: Payment streaming from Top Glove as well as the revenue streaming project itself.com/npv-calculator 6.1 Repayment of loan (6.2 6.5%) http://dailycalculators.

1 Collateral offered Top Glove To increase the bank confidence that the loand will be paid as promised. Klang. This is evidently reflected in the increased trend in total healthcare expenditure as a percentage of Gross Domestic Product (“GDP”) in several countries. Selangor D. Zeti said private investments were expected to grow 15. 5th Miles. There are still steady demand even from Europe and boundless new opportunities available to the industry. particularly in emerging markets. Corporation Berhad uses its other operating project to pledge as collateral. Jln Teratai. which is the largest glove importer. Off Jln Meru. led by investments in the services sector while private consumption growth would remain firm at 7. Real GDP grew 5.0 Conditions 8. Despite the ongoing economic crisis in Europe.6% this year.0 Collateral 7. Malaysia. has been seeing an uptrend in total healthcare expenditure 17 .7.1% backed by income growth and stable employment prospects. surpassed consensus forecasts of a little over 5. 8.5.0%.2 Value of collateral: RM 12 million 7. The United States. 7. The healthcare sector continues to be resilient as gloves are deemed as basic necessities. the demand for rubber glove has remained intact. 41050. Loan obtained to acquire Factory 4 has been fully paid.4 State encumberances (if any): NA. Demand is set to increase about 8% to 10% annually as the healthcare standards in these markets improve. Address: Lot 5987. Top Glove Factory 4.1 External conditions (economic) The Malaysian economy is clearly on track to achieve high income and advanced nation status by 2020.6% in 2012.0% and the Treasury's 2013 Budget forecast of between 4. Bank Negara Governor Tan Sri Dr Zeti Akhtar Aziz expects growth to be sustained on the back of higher domestic demand and an improvement on the exports front as the global economy recovers.5 .3 Loan to Value: 1:2 7.E.

the Group recorded revenue and net profit of RM2. The Group had on 14 June 2012 declared an interim single tier dividend of 7 sen per share amounting to RM43.1% of GDP are experiencing similar trends.2% of its GDP in 2009. Payment of the interim dividend was made on 19 July 2012. The roles of the Chairman and the Managing Director are distinct and separate so as to ensure balance of power and authority. than any other country in the world. According to the World Health Organization.3 million respectively. 8.2% respectively have posted an increasing healthcare spending trend. The United Kingdom and major European countries with healthcare spending of an average of 10. the 16 sen per share represents an increase of 45% over last year’s dividend of 11 sen per share and a total dividend payment ratio of approximately 50%.3 billion and RM207. 9. Research and development (“R&D”) is a cornerstone for the success of our business. made up of five (5) Executive Directors including the Chairman and Managing Director and four (4) Independent Non-Executive Directors. On a full year dividend basis. These figures reflect tremendous strong growth opportunities for the rubber glove industry. These represent a 13% increase in revenue and 80% increase in net profit over the results recorded in the preceding financial year. the highest in the world.3 million in conjunction with the financial results announcement for the third quarter ended 31 May 2012. focused on consistently producing high quality gloves at efficient low cost. We invest considerable resources into developing new products and services which are market and customer driven.0%.6% and 4. The composition reflects a balance of Executive Directors and Non-Executive Directors (including Independent Non-Executive Directors) 18 . both per capita and as a share of GDP. which is currently under construction. 4. By March 2035.as a percentage of GDP since 2000. China and India with healthcare spending of 9.2 Internal conditions: Top Glove has been rated For the financial year ended 31 August 2012. The United States’ healthcare reform will spend more on healthcare.0 Compliance Issues The Board currently comprises nine (9) members. The research and development process is driven by teams of R&D employees. total healthcare expenditure in the United States was 16. and it is expected that other countries would raise their hygiene standards eventually. we will set up an advanced R&D center based at factory number 25. Rising standards of living in Brazil.

10. Besides.0Justification for the loan Character The board of directors are very experienced in the industry as well as their own respective field. major transactions and matters relating to the Group are reviewed and also to formulate operational strategies. making operational decisions and monitoring the day-to-day running of the business. advice and judgement to ensure a balanced and unbiased decision making process to ensure that the long term interests of all Stakeholders and the community are well protected. 19 . Clear demarcation of duties. responsibilities and authority are being practiced by the Board. they are very well known and repectable figures in the industry as much as in the world in the country. A brief description of the background of each Director is presented on pages 8 to 12 of this Annual Report. They contributed to the formulation of policies. The Non-Executive Directors are to deliberate and discuss policies and strategies formulated and proposed by the management with the view of the long-term interests of all Stakeholders. Sekarajasekaran a/l Arasaratnam as the Senior Independent NonExecutive Director of the Board to whom concerns may be conveyed where it could be inappropriate for the concerns to be dealt with by the Chairman and Managing Director The Chairman is primarily responsible for the orderly conduct of the Board Meetings and ensure effectiveness of the Board and the Managing Director will assist the Chairman in the effectiveness of implementation of Board policies. The Executive Directors are responsible for the day-to-day operations of the Group whereby operational issues and problems are discussed. The Board has identified Mr. and decision-making using their expertise and experience. The Independent Non-Executive Directors fulfill a pivotal role in corporate accountability. including defining the limits of the management’s responsibilities. They also provide guidance and promote professionalism to the management. providing independent and unbiased view.such that no individual or small group of individuals can dominate the Board’s decision making.

Periodic payment of RM89.000.660. Capacity The pay-off date is on June 2020.5% Loan period: 7 years Scheduled number payments: 84 (monthly basis ) If Top Glove Corporation follows closely to these terms and conditions. The loan of RM6. It addtion.Capital Top Glove Corporation has shown that they are committed and capable by providing 70% of the project which is equivalent of RM14. thus the loan of RM6.097 Interest Rate: 6. Besides. By studying the group’s revenue generated from the project and equity in hand. Collateral The Top Glove Factory 4 offered by Top Glove Corporation Berhad as collateral is eligible and not own by any other entities. The loan is payable monthly for 7 years. Thus.85% is inflated and not a good indicator because the cost of land is not taken in the calculation.000. the loan seems payable by Top Glove Corporation Berhad and is not likely to default.76 indicating the project is profitable. It was acquired in 2010. the value of the collateral is sufficient. Having said that.0Loan Decision and Loan structuring All the 6 C’s requirements have been fulfilled based on the evaluation done above. it is almost certain that they would settlet this loan within the agreed time frame of 7 years and this would benefit 20 . Compliance (above mentioned) 11. In addition. Conditions The company’s performance is somewhat independent on the national economy as its export activities is significant. Loan to value is 1:2.000. the national economy is also performing well as mentioned earlier. it is assume that the IRR of 6.000 should be approved under these terms and conditions.000. the project forecasts a positive NVP of RM404.000 only makes up the remaining 30%. growth prospect of the company is positive.

Top Glove Corporation Berhad is also a good company and has a strong credit record (no default).the bank. 21 . it has high creditworthiness. 12. The indicators examined seem to provide enough comfort for the loan for the loan and this would be a benefit.0Conclusions The loan is approved as the company has low risk of default based on the information studied. Thus.

2011.2010 22 .Appendix 1 : Income Statements 2012.

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Appendix 2: Financial Positions year end 2012. 2010 25 . 2011.

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