ANALYSTS have maintained buy calls on Top Glove Corp Bhd, citing a minimal impact from the detention order issued by the US Customs and Border Protection (CBP).
The detention order was issued on two of Top Glove’s subsidiaries, Top Glove Sdn Bhd and TG Medical Sdn Bhd, on July 15.
However, analysts believe that this will have a minimal impact on Top Glove, as the company still maintains another avenue of exporting to the US, as well as having the rest of the global market to pick up the slack.
“As there is a shortage of gloves globally, we believe that Top Glove can sell its gloves to other countries if needed, if the suspension is prolonged during the Covid-19 crisis,” said Affin Hwang Capital analyst Ng Chi Hoong.
Analysts also agree that the matter should be resolved speedily, thus having a minimal impact on Top Glove.
“We gather that the company has contacted CBP to better understand the issue. It is also working towards a speedy resolution of the matter, and hopes to achieve this within two weeks,” said RHB Investment Bank analyst Alan Lim.
Top Glove has also guided that the shipments detained in the US can also be shipped to other countries, or shipped back to Malaysia if necessary, meaning the stock is not out of Top Glove’s hands.
“Top Glove will continue to ship stocks to the US and park those at the free trade zone. In a worst-case scenario, Top Glove could ship the stocks to other countries as demand for gloves is strong amid the Covid-19 pandemic,” said MIDF Research analyst Jessica Low Jze Tieng.
Still, TA Securities analyst Tan Kong Jin believes that there will still be some diversion of orders to other players.
“Peers like Supermax Corp Bhd, Kossan Rubber Industries Bhd, and Hartalega Holdings Bhd would be the main beneficiaries as they have more bargaining power against the US customers now. Order and enquiries will surge as some customers might not want to purchase from Top Glove till the CBP revokes the detention order,” said Tan.
Affin Hwang Capital, RHB Investment Bank, MIDF Research, AmInvestment Bank, JF Apex Securities, and TA Securities all reiterated their buy calls on Top Glove, with maintained target prices or fair values of RM22.40, RM28.88, RM26.12, RM25.70, RM25.40, and RM31.66 respectively.
At 12.05pm, Top Glove’s shares were last done at RM22.42, rallying 13.81% or RM2.72, with 37.4 million shares traded. – July 17, 2020
