ATA IMS Bhd has rejected allegations that it has been using forced labour as the company complies strictly with Malaysian labour laws.
In an online analyst briefing yesterday, the electronics manufacturing service (EMS) provider said its foreign worker recruitments also comply with international standards whereby a zero recruitment cost policy is in place.
This means that foreign workers are not required to pay any third-party or agent fees as the group also ensures that its recruitment agents undergo due diligence to comply with such practices.
“Additionally, all workers are paid above minimum wage and overtime (OT) work is done on a voluntary basis with compulsory rest days in place,” AmBank Research analyst Dalilah Fairoz pointed out in a company update.
“Hostel accommodation is provided for its foreign labour and is regularly audited by its key customers, global retailers, and external independent auditors.”
Additionally, ATA IMS has a SEDEX membership and OHSAS 18000 certification which ensure its practices are in adherence with internationally recognised standards.
Last Thursday (May 20), ATA IMS encountered a severe stock bashing which was linked to speculation of migrant worker rights activist Andy Hall assessing the EMS sector on similar grounds as the glove sector.
In a related development, AmBank Research also shared that as part of the Government’s tightening of the movement control order (MCO 3.0) standard operating procedures (SOPs) by restricting 40% of private sector staff to work from home, there is likelihood that ATA IMS’ 1Q FY3/2022 performance may be impacted.
“Recall that in March 2020 (MCO 1.0), ATA’s production was halted for approximately a month until it was allowed to resume operations gradually at 25%, 50% and later back to full workforce capacity in early May 2020,” noted the research house. “The group shared that it had been able to make up for the order backlogs last year.”
However, AmResearch cautioned that the transmission of newer COVID-19 variants poses a larger risk of spread this time around and an extension to MCO 3.0 seems likely at this juncture with a longer extension posing a larger risk to earnings.
“We maintain our FY3/2021F forecasts but trim our FY2022F-FY2023F forecasts by 3-6%,” justified the research house.
All-in-all, AmBank Research maintained its “buy” rating on ATA IMS with a lower fair value of RM3.34/share (from RM3.45/share previously), pegged to an FY3/2023F price-to-earnings ratio (PE) of 18 times.
“After factoring potential impact from MCO 3.0, we view that the correction in ATA’s share price presents an opportunity to accumulate the stock,” opined the research house.
“We continue to like ATA IMS for its medium-to-longer term positive prospects arising from: (i) it being the purest proxy to its main customer’s growth prospects; (ii) its efforts towards being vertically integrated; and (iii) customer diversification opportunities arising from the US-China trade war diversion which is supported by the group’s modular expansion strategy.”
At 11.28am, ATA IMS was unchanged at RM2.50 with 1.3 million shares traded, thus valuing the company at RM3.01 bil. – May 25, 2021
