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AmInvest Research Reports

Author: AmInvest   |   Latest post: Fri, 15 Jan 2021, 9:57 AM

 

Top Glove Corp - Charges loom under Act 446 over worker accommodation

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  • According to media reports, Top Glove is expected to face charges under the Workers' Minimum Standards of Housing and Amenities Act 1990 (Act 446). Labour Department director-general Asri Ab Rahman said 63 charges, involving a number of companies and employers including Top Glove, have been referred to the deputy public prosecutor's office for further action. A total 21 investigation papers have been opened with 19 of it involving six groups of companies under Top Glove.
  • Meanwhile, Senior Minister (Security Cluster) Datuk Seri Ismail Sabri Yaakob said in an earlier statement that employers who defy the Ministry of Human Resources’ regulations would be fined RM50,000 per worker.
  • Top Glove has issued a statement saying that the company is seeking more accommodation and efforts to improve existing worker accommodations are ongoing, in view of the large number of workers. It expects to complete implementing the measures by 31 December 2020.
  • While the investigation is still ongoing, we are not making any changes to our earnings forecasts at this juncture. However, the latest development could potentially raise the perceived risk premium to Top Glove, hence reducing our PER valuation to 25x from 28x. 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.

Source: AmInvest Research - 2 Dec 2020

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