UNLIKE its other industry peers, Hartalega Holdings Bhd will unlikely run into major issues with the US Customs and Border Protection (CBP).
This is because the Big-Four glove maker’s current social compliance efforts are miles ahead of many companies at time of respective investigations, according to AmBank Research.
“Additionally, the majority of its workers’ accommodation is already in line with the ILO’s (International Labour Organization) workers’ housing recommendations, being fully furnished with the necessary healthcare, leisure and dining infrastructure,” observed AmBank Research in a company update.
Yesterday, Hartalega organised a conference call with the sell-side analysts and fund managers to allay concerns pertaining to foreign workers remediation fees.
Commenting on the action of activists who have taken workers’ words without any verification, AmBank Research said Hartalega will be conducting another round of interview for zero-recruitment cost programme workers who claimed that they have forked out their own money to pay recruitment agents in the past.
“Worth noting is that Hartalega began its zero-cost programme and remediation efforts well before recent the Top Glove Corp Bhd controversies came to light,” justified the research house.
On this note, Hartalega has highlighted more demanding industry requirements following Top Glove’s controversy, citing a lack of uniform industry standards as an issue.
“It stresses the need for the recruitment process being further regulated,” asserted AmBank Research.
Elaborating on its social compliance efforts, Hartalega has thus far committed towards the remediation of recruitment fees of up to RM40 mil.
“It has so far completed its reimbursement of non-zero cost programme workers with the remainder of its current workers to be reimbursed by July 2021,” noted AmResearch. “It will take a further six months to reimburse former workers.”
All-in-all, the research house maintained its “hold” call on Hartalega with a lower fair value of RM8.55 share (from RM9.90 previously) to reflect a 3% premium for an ESG (environment, social and governance) rating of four stars.
“Our valuation is based on a reduced PER (price-to-earnings ratio) of 19 times FY2023F EPS (earnings per share) (previously 22 times),” stated AmResearch.
“We use a lower PER as global demand for gloves is expected to ease on successful vaccination efforts. Also, investor sentiment on glove stocks is negative and there is a lack of re-rating short term catalysts.”
At the close of this morning’s trading session, Hartalega was down 2 sen or 0.24% to RM8.41 with 1.63 million shares traded, thus valuing the company at RM28.23 bil. – June 15, 2021
