KUALA LUMPUR (Dec 2): Top Glove Corp Bhd fell as much as 22 sen or 3.24% to RM6.57 after the government said it had opened investigations into the glove maker over its workers’ housing.
At 10.15am, the group had pared some losses at RM6.69, still down 10 sen or 1.47%. The stock was among the top losers this morning
The counter had fallen 30.31% from its recent peak of RM9.60 on Oct 19. At RM6.69, the company was valued at RM54.83 billion.
It saw 22.05 million shares change hands, making it one of the top actively traded stocks on the bourse this morning.
AmInvestment Bank Research analyst Thong Pak Leng said in a note today that the latest development could potentially raise Top Glove’s perceived risk premium, hence the research house had reduced its price-earnings ratio (PER) valuation to 25 times from 28 times.
“With 25 times PER, we arrived at a lower fair value (FV) of RM7.03 per share (previously RM7.88) for Top Glove based on [estimated] 2022 earnings per share (EPS),” he said.
“While the investigations are still ongoing, we are not making any changes to our earnings forecasts at this juncture,” he said, maintaining his “hold” call for the stock.
Meanwhile, CGS-CIMB analyst Walter Aw said in a note that assuming that each worker accommodation is hit by one charge (it is estimated that Top Glove has a total of 300 worker accommodations), Top Glove would have to pay fines of up to RM15 million, which is 0.14% of his FY21 EPS estimate (for the financial year ending Aug 31, 2021).
“At this juncture, we are unable to ascertain the impact of the Ministry of Human Resources’ (MoHR) charges (RM50,000 per offence) on Top Glove, pending further details, such as the number and types of charges to be filed against Top Glove,” he said.
He also made no changes to his FY21 to FY23 EPS estimates, awaiting further updates on the matter.
Aw, however, kept his “add” call for the stock, with a target price (TP) of RM10, based on 17 times 2022F PER (forecasted in line with its five-year historical mean).
He continued to like Top Glove as it is a key beneficiary of higher glove demand due to the Covid-19 pandemic, given its position as the world’s largest glove maker.
It was reported yesterday that the MoHR had opened 19 investigation papers into six subsidiaries of Top Glove, following enforcement operations in five states, amid the spread of Covid-19 in the Teratai Cluster originating from the group’s workers’ dormitories in Meru, Klang.
Top Glove said in a statement the company is fully cooperating with the authorities. It is also seeking more accommodations and efforts to improve its existing workers’ accommodations. It also expects the exercise to improve its workers’ accommodations to be completed by Dec 31, 2020.