ESG concerns prompt Top Glove rating downgrade

CONCERNED over its rampant environmental, social and governance (ESG) breaches, Public Investment Bank has become one of the first local research houses to downgrade its earlier bullish rating on Top Glove Corp Bhd.

In its latest company update, the research house downgraded Top Glove to “neutral” (from “trading buy” previously) while its target price is also lowered to RM7.30 (from RM9.70 previously).

“We are incorporating a discount of 20% to our price-to-earnings (PE) multiple, down from 10.5 times previously to eight times (at its five-year historical mean) currently,” justified analyst Chia Siu Li in a company update.

“(However), we do not discount the fact that glove makers like Top Glove will continue to deliver record-breaking profits in the coming quarters as average selling prices (ASPs) are expected to increase by another 30% quarter-on-quarter in 2Q FY2021.”

PublicInvest Research further reasoned that its decision centred on reports of Top Glove having breached the Workers’ Minimum Standards of Housing Amenities Act 1990 (Act 446) which entails failure to provide proper housing for its workers.

Additionally, the world’s largest glove maker was also reported to have fired a whistle-blower after he shared photographs proving lack of physical distancing among factory workers outside its plant.

At 9.25am, Top Glove was down 3 sen or 0.45% to RM6.67 with 1.39 million shares traded, thus valuing the company at RM54.67 bil. – Dec 18, 2020

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