SENSITIVITY of institutional investors towards environmental, social and governance (ESG) consideration – which somehow supersedes financial gains – has edged up multiple folds in recent times.
The Employees Provident Fund (EPF) which is Malaysia’s prominent institutional investor has not been mincing its words that it wanted to work with its investee companies in terms of better disclosure and transparency on ESG data, hence looking beyond short-term returns by incorporating sustainability parameters into its key performance indicators.
With the spotlight currently shining on the forced labour issue surrounding the country’s three key electronic manufacturing service (EMS) providers, the retirement fund has ceased to be a substantial shareholder of VS Industry following a disposal of 21.67 million shares on Dec 2 Bhd (stake dropping below 5%).
Based on back-of-the-envelope calculations by The Edge, the latest transaction leaves EPF with 175.47 million shares in VS Industry or about 4.6% stake in the company.
VS Industry’s share price slipped 2 sen or 1.59% to close at RM1.24 yesterday (Dec 8) with 19.91 million shares traded, thus valuing the company at RM4.75 bil.
Meanwhile, the Retirement Fund Inc (KWAP) which is also an institutional investor in VS Industry made three transactions on Dec 6 with an acquisition of 600,000 shares versus disposal of 1.71 million shares on Dec 6, according to a stock exchange filing dated Dec 7.
The above transaction may seem paltry if compared to the disposal of 6.58 million shares of KWAP’s indirect interest on Dec 2 (last Thursday) when VS Industry saw its share price dipped 27 sen or 19.01% to an intraday/52-week low of 99.5% before paring loses to close at RM1.15.
Unlike EPF, however, KWAP still holds a 7.44% and 1.45% direct and indirect stake respectively in VS Industry.
In its latest company update on fellow EMS player SKP Resources Bhd, TA Securities Research cautioned against any tendency to undermine ESG considerations.
The research house was referring to the issues concerning overtime and payment of recruitment fees which were brought up by migrant worker rights specialist Andy Hall against the company’s wholly owned subsidiary SPI Plastic Industries (M) Sdn Bhd (SPI).
“While we understand that SPI’s contribution is smallish at ~3% of SKP’s revenue, we view the latest development negatively, especially with ESG now taking even greater significance,” justified analyst Wilson Loo in a company update.
“Therein also lies the risk to its relationships with existing customers. However, we take comfort of SKP’s prompt and proactive approach to remedy the issue which in turn, would enable the group to uplift its ESG standards.”
Like VS Industry, SKP has also ‘officially’ engaged Hall with the mutual understanding of upholding the welfare of the workforce involved in SKPs production process.
“As a responsible corporate citizen, SKP is open to work with independent and external, professional and well-respected parties who can add value and further strengthen our ESG initiatives, especially in enhancing the welfare of our migrant workers,” added SKP’s executive director Ivan Gan Poh San who was instrumental in engaging Hall.
A 9.21am, SKP was up 2 sen or 1.27% with 1.95 million shares traded, thus valuing the company at RM2.48 bil while VS Industry was down 1 sen or 0.81% at RM1.23 with 1.13 million shares exchanged hands to give the company a market cap of RM4.71 bil. – Dec 9, 2021
