PETALING JAYA: Analysts are waiting to see the outcome of the charges Top Glove Corp Bhd could face under the Workers’ Minimum Standards of Housing and Amenities Act 1990 (Act 446), maintaining its ratings on the group pending updates.
CGS CIMB Research said it is making no changes to its FY21-23 earnings per share (EPS) estimates at this juncture, while also keeping its ‘add’ rating with a target price of RM10.
“We continue to like Top Glove as it is the key beneficiary of higher glove demand due to the Covid-19 pandemic, given its position as the world’s largest glove maker,” it said.
It added that it is also unable to ascertain the impact of Human Resources Ministry charges of RM50,000 per offence, pending further details such as number and type of charges to be filed against the group.
“Assuming that each worker accommodation (we estimate that Top Glove has a total of 300 worker accommodations) is hit by one charge, they will have to pay fines up to RM15 million,” it added.
Conversely, AmInvestment Bank Research said that while the investigation is still ongoing, it is not making any changes to its earnings forecasts at this juncture but the latest development could potentially raise the perceived risk premium to Top Glove, hence reducing its price-to-earnings ratio (PER) valuation to 25 times from 28 times.
“With the 25x PER, we arrive at a lower fair value of RM7.03 per share (previously RM7.88) based on CY22 EPS. Maintain hold recommendation,” it said.
To recap, the charges that Top Glove faces comes after post enforcement operations that were carried out last week on six of its companies in five states to investigate the conditions of its worker accommodations and hostels.
The findings indicate that Top Glove did not apply for accommodation certificates from the director-general of the Department of Labour of Peninsular Malaysia (JTKSM) as required under Act 446, and that its accommodations are cramped, uncomfortable, have poor ventilation, and lacked rest and kitchen areas.
Top Glove has said that it will fully cooperate with the authorities on this matter, and will gradually increase the number of housing location for its workers, including its recent efforts to spend RM20 million to purchase up to 100 units of apartments for its workers in the past two months.
This is in addition to its previous investment of up to RM50 million to set up 1,000 double-storey houses and hostels with various facilities.
Source: The Sun Daily
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