Top Glove Gives Special Dividend Of 20%

As predicted. Top Glove Corporation Bhd, which has recorded supernormal profits due to demand surge caused by the Covid-19 pandemic, announced on Monday it has committed to a special dividend of 20%.

In their press statement on Monday, the world’s largest glove maker said the special dividend was in addition to its existing dividend policy of a 50% dividend payout ratio on its profit after tax and minority interests for the second, third and fourth quarters of financial year 2021.

At 3.47pm, it was trading at RM5.65, down 47 sen with nearly 320 million shares done.

It hit an early low of RM5.23.

The FBM KLCI was down 18.90 points or 1.16% to 1,608.32. Turnover was 6.04 billion shares valued at RM4.85bil.

Playing In The Gaming Industry

Electronic Arts (NASDAQ: EA) saw its stock tank last week, falling as much as 8%, after CEO John Riccitiello announced plans to step down at the end of the month. The company also announced that its fourth quarter results could come in at the low end of its previous earnings guidance of $1.08 billion. But is this just a minor set back for the company?

Despite the stock's pullback on the news, the company is still up nicely year to date:

The push to online gaming

DFC Intelligence estimates that the online video grame market will grow from $19 billion in 2011 to $35 billion in 2017. By 2017 online gaming is expected to account for over 40% of the total video game revenues. Meanwhile, Gartner also has robust estimates for the industry, expecting that consumer spending on online gaming will grow at an annualized rate of 27% through 2015.

The good news is that EA has a strong online presence which presents solid growth opportunities for the company. The digital (online) business is expected to be an important growth driver for the EA as growth in packaged games appears to be declining.

For 2012, the digital business made up 54% of EA's total revenues and grew 47% year over year basis. The other big positive is that EA expects its digital business to grow by an annualized 20% over the next four years.

Activision Blizzard (NASDAQ: ATVI) is another major game maker, with a market cap nearly triple that of EA. Activision has also been making the transition to digital, with 57% of its revenues generated from the segment last quarter. Credit Suisse believes that the company's 4Q earnings beat was a result of higher-quality games -- including its Call of Duty series. The investment firm also believes that high-quality content will continue to be the drivers for long-term company growth. However, I think EA is the better value -- explained later (read about Activision's move to mobile gaming).

Take-Two Interactive Software, Inc. (NASDAQ: TTWO) currently only derives 23% of its revenues from digital. Last quarter, Take-Two posted EPS of $0.67 compared to the $0.27 for the same quarter last year, and beating consensus of $0.56 handily. This was in large part thanks to its NBA 2K13 and Borderlands 2 games. Take-Two should be able to ride the coat tails of is upcoming game releases from its BioShock and Grand Theft Auto series through 2013, but I think the growth potential of Take-Two is not as pronounced as that of EA.

Industry headwinds include the emergence of online games on social networking websites, including Facebook (NASDAQ: FB). Facebook, however, does expect revenues via payments from the games platform to remain subdued. Facebook games are mostly desktop based and declining desktop usage in the developed markets is expected to hurt its top-line growth in 2013. Facebook is instead focused more on monetizing its mobile presence and breaking into the search industry (read about Facebook's search ambitions).

The other side of the coin

If online gaming is one side of the coin for gamings' future, then mobile is the other. Zynga (NASDAQ: ZNGA) has already recognized such a trend. The social gaming company is now transitioning from online gaming and Facebook to a mobile-focused strategy. This should be a big positive for the company as the number of people spending time on smartphones and tablets is rapidly growing.

Mobile will need to lead the future for Zynga, which reported flat revenues year over year last quarter, but a net loss of nearly $50 million and a 15% decline in bookings year over year. Although Zynga is looking to make its move into mobile never fear, EA has quite the presence here (in mobile) too; "EA Mobile is the world's leading publisher of mobile games."

Don't be fooled

EA appears to be one of the best positioned gaming stocks and the recent pull back could be a great opportunity to get into the stock. EA is also the best "value" from a valuation perspective. The company trades at a 1.4 price to sales ratio, compared to Activision's 2.2; meanwhile, their growth rates are very similar. Analysts expect the companies to grow at 14% (EA) and 13% (Activision) over the next five years. I would be remiss if I did not mention Take-Two, which trades at a mere 0.86 times sales. Yet, I think the stock warrants the low valuation multiple given its long-term expected earnings growth rate is only 9%

Global Economy Worsening

TOKYO, Feb 19 – The yen resumed falling yesterday after Japan signaled it would push ahead with expansionist monetary policies having escaped criticism from the world’s 20 biggest economies at the weekend.

Industrial metals also dipped and European shares were soft on lingering worries about the economic outlook, especially for the euro zone. While the risk of an inconclusive outcome in Italy’s forthcoming election added to investor concerns.

However, activity was curtailed by the closure of markets in the United States for the Presidents’ Day holiday.

The yen, which has dropped 20 per cent against the dollar since mid-November, fell further after financial leaders from the G20 promised not to devalue their currencies to boost exports and avoided singling out Japan for any direct criticism.

The dollar rose 0.5 per cent to 93.95 yen, near a 33-month peak of 94.47 yen set a week ago. The euro added 0.3 per cent to 125.40 yen, to be midway between Friday’s two-week low of 122.90 and a 34-month high of 127.71 yen hit earlier this month.

Strategists said the yen was likely to stay weak, though its decline could lose momentum until it becomes clear who will be taking the helm at the Bank of Japan when the current governor steps down on March 19.

“The yen probably will weaken a little further in anticipation of more aggressive easing under a new leadership team at the Bank of Japan,” said Julian Jessop, chief global economist at Capital Economics.

Japan’s Prime Minister Shinzo Abe is poised to nominate the new governor in the next few days. Sources have told Reuters that former financial bureaucrat Toshiro Muto, considered likely to be less radical than other candidates, was leading the field.

Meanwhile the euro dipped slightly against the dollar when European Central Bank president Mario Draghi said the currency’s recent gains made any rise in inflation less likely and added that he had yet to see any improvement in the euro zone economy.

Speaking before the European Parliament, Draghi said the euro’s exchange rate was not a policy target but was important for growth and stability, adding that appreciation of the euro “is a risk”.

The comments left the euro down 0.2 per cent at US$1.3334 (RM4.132).

Elsewhere in the currency market, sterling hit a seven-month low against the dollar, after a key policymaker made comments about the need for further weakness and recent poor data which has kept alive worries of another British recession.

Sterling fell 0.25 per cent to US$1.5476 having earlier touched US$1.5438, its lowest since July 13.

DATA LOOMS

A big week for data on the outlook for the world’s economy weighed on other riskier asset markets following the recent dire fourth-quarter growth numbers for the euro zone and Japan, along with Friday’s soft US manufacturing figures.

In European markets, attention is focused on the euro area Purchasing Managers’ Indexes for February and German sentiment indices due later in the week which could affect hopes for a recovery this year.

Analysts expect Thursday’s euro area flash PMI indices, which offer pointers to economic activity around six months out, to show growth stabilizing across the recession-hit region, leaving intact hopes for a recovery in the second half of 2013.

Concerns over an inconclusive outcome in the Italian election on Sunday and yesterday have added to the weaker sentiment as a fragmented parliament could hamper a future government’s efforts to reform the struggling economy.

The worries about the outlook for Italy were encouraging investors back into safe-haven German government bonds yesterday, with 10-year Bund yields easing 3.5 basis points to be around 1.63 per cent.

“Political uncertainty will keep Bunds well bid this week,” ING rate strategist Alessandro Giansanti said, adding that only better than expected economic data could create selling pressure on German debt in the near term.

Italian 10-year yields were 4 basis points higher on the day at 4.41 per cent.