SECTION B

BASED ON THE PRE-SEEN ARTICLES (AS UPLOADED IN TIMeS), ANSWER ALL QUESTIONS. [PRE-SIGHTED ARTICLE]

About Top Glove Top Glove Corporation Bhd is the world's largest rubber glove manufacturer, with operations spanning across Malaysia, Thailand, China, US and Europe. Listed on the Malaysian Bourse in March 2001 and on the Mainboard of the Singapore Exchange in June 2016, it has demonstrated steady growth with a compound annual growth rate (CAGR) of 24% for revenue and 29% for profit after tax over the past 16 years.

The Top Glove success story began a quarter of a century ago in 1991, as a local business enterprise with a single factory and 3 production lines. Today, it has captured 25% of the world market share and offers a comprehensive product range, fulfilling demand in both the healthcare and non- healthcare segment. Top Glove serves a network of over 2,000 satisfied customers in more than 195 countries, and these numbers are still growing.

Its outstanding achievements and global recognition are credited largely to its founder Tan Sri Dr Lim Wee Chai, the visionary and driving force, who within a short span of time, has built the Malaysian-based company into a resounding global success.

Having just celebrated its 25th anniversary in 2016, Top Glove continues to raise its game, producing high quality gloves at an efficient low cost based on its time-proven Business Direction. Not content to rest on its laurels, Top Glove has now cast its eye on the next level of success and aspires to increase its world market share to 30% by 2020. It is also aggressively expanding its business scope and on the lookout for M&A opportunities in similar and related industries.

Top Glove in a lucrative industry KUALA LUMPUR Top Glove, the world's largest rubber glove manufacturer, is not resting on its laurels, but rather it is in an expansionary mode and is exploring synergistic mergers and acquisitions as a way of expanding its business.

Aside from this, it is also looking at the Chinese market very seriously and hopes to cash in on China's expanding population, heightened health awareness and higher hygiene standards. As part of its expansion, it hopes to build one to two new factories every year in Malaysia and other Asean countries which have business-friendly policies.

"We are not in a rush to conclude deals as our priority is to identify good targets, or businesses with good valuations, which can immediately contribute positively to the group," chairman Tan Sri Lim Wee Chai told Malay Mail in an email interview.

Top Glove is one of the top-performing companies on the main market of Bursa Malaysia since its listing in 2001. It has been maintaining, approximately, a 50% dividend payout ratio for the last few years. Additionally, it is also continuing to look at joint ventures and setups in related

industries such as inner packaging materials, nitrile latex and condom manufacturing, with its first condom factory targeted for completion in 2018.

The first-phase of the two phase condom manufacturing plant would cost RM30 million for 10 production lines, followed by 10 more lines in the second phase which cost RM20 million. A further RM25 million has been allocated for building the factory as well as to purchase the land it had acquired earlier. The initial contribution from condom manufacturing to the Top Glove's profit is expected to be 5%, but Lim added that the company is confident of growing the business forward. The factory will feature 20 double track lines with an estimated output of 2 billion pieces of condoms a year.

Still, the glove manufacturer is not losing sight of the lucrative Chinese market with the acquisition of two new factories in Nilai and Muar which has a combined production capacity of 1.1 billion pieces of gloves per annum, and is expected to grow its market share in China.

"However China with its population of nearly 1.4 billion, is a huge market where demand is continuing grow in tandem with healthcare awareness, more stringent health regulations and either hygiene standards," Lim said

Currently, China contributes about 2% of the group total sales. It aims to grow the sales volume in China further, and Top Glove is open to merger and acquisition opportunities that will enable it to do it efficiently.

Top Glove already has fingerprints in nearly every part of the world, with customers and gloves in 195 countries accounting for 25% of the world's market share for rubber gloves. Its largest markets are North America at 32% and Europe at 29%. Asia, excluding Japan, holds 13% of its market, followed by Latin America with 10%. Japan represents 8% while the Middle East holds 6% and the remaining percentage goes to Africa.

Top Glove is also focusing on increasing its sales in emerging countries which mean the potential for growth is promising. "Our focus will be growing our sales in emerging and developing markets, where usage is relatively low but rapidly on the rise," Lee said

It plans to achieve this by actively participating in trade shows to expand its customer base. "At the same time, we must ensure that we continue to deliver quality products at a low cost as well as provide good service to our existing customers to secure repeat orders," he said. Top Glove has 32 factories and 550 Glove production lines, with a glove production 51.9 billion pieces per annum and 11,000 employees.

Source: Adapted and edited from The Star Online, Saturday, 27 June.

Top Glove hopes to grow China sales

...The company recently acquired two new factories in Muar and Nilai, which are expected to produce mainly for its China's market. Despite the company's eye on China, the world's largest

rubber glove maker with a 25% share of the global rubber glove market has ruled out mergers and acquisitions (M&A) in China for the time being due to the high cost of manufacturing there.

"We continue to expand through organic growth and M&As, but we may not want to acquire a company in China because the operation cost there is becoming more expensive. "Labour cost, factory cost, land cost and operation cost are all going up. It's not that competitive anymore in terms of manufacturing," Lim said. He said manufacturing labour cost in China was only half of Malaysia's 15 years ago, yet now is the same, or even more expensive than that of Malaysia. "Some manufacturing companies are moving out of China to Malaysia, Vietnam and Thailand. Manufacturing in China is not cheap anymore compared to 15 or 16 years ago," Lim said.

Source: The Malaysia Reserve Date: 27 July 2017 Thursday, July 27th, 2017 at, Business | News By NG MIN SHEN/ TMR Pix by Muhd Amin Naharul

New clinic with Global Doctors a cost-saving measure August 30, 2017 Aimed at serving neighbouring communities, TGGD focusing on preventive healthcare offers services such as diagnosis, observation, consultation, treatment, intervention and rehabilitation, as well as full-tiered dental facilities, on an outpatient basis. The clinic is one of several ventures by Top Glove to diversify into related businesses, including packaging materials such as glove boxes, and manufacturing condoms.

"We cannot depend solely on organic growth. For a company of our size to expand efficiently, we must also look at non-organic growth such as mergers and acquisitions and joint ventures into related businesses with suitable partners," Lim said at the launch of TGGD yesterday, adding that the group needed to diversify into other products and businesses as well.

...The launch was officiated by International Trade and Industry Minister Datuk Seri Mustapa Mohamed, who was in Meru earlier yesterday to launch the company's new research and development (R&D) centre.

The R&D centre was established in 2013 to drive innovation at Top Glove by developing new products and technologies, as well as partaking in product enhancements. Top Glove shares slid one sen or 0.18% to RM5.47 yesterday, valuing it at RM6.87 billion.

Source: Adapted and edited from http://www.theedgemarkets.com/article/new-clinic- global-doctors-costsaving-measure

Rubber industry has prospects for growth KLANG - Malaysia's rubber industry is not a sunset industry following demand for high-value engineering rubber products from many countries, says Minister of Plantation Industries and Commodities, Datuk Seri Mah Siew Keong. The four major players in the industry are Top Glove, Kossan, Supermax and Hartalega.

He said Malaysia had the ability to produce high-value engineering rubber products used specially in the field of vibration and earthquake engineering. Mah said Malaysian manufacturers had

installed and supplied rubber seismic bearings to high-seismic activity countries like New Zealand, Iran, Indonesia, Turkey and China.

"Our rubber products are of world standard, so the rubber industry is definitely not a sunset industry," he told reporters after visiting the Doshin Rubber Products (M) Sdn Bhd factory in Klang on Monday. Mah said rubber downstream products in Malaysia would be part of the 2050 National Transformation efforts towards producing high-technology and high value-added products. - Bernama

Source adapted and edited http://www.thestar.com.my/business/business- news/2017/02/20/rubber-industry-has-prospects-for-growth/#QwlKvjLLaUBXBWzk.99

Question

a) Compare these three reasons with the logic underlying related and unrelated diversification. In order to be able to get an idea of the relevance of those reasons, what kind of additional information would you need?

b) based on the article, do you think Top glove is diversification? Explain why