THE recent brouhaha over Top Glove Corp Bhd ‘failing’ the litmus test of its social auditor Amfori Business Social Compliance (BSCI) is one of misconceptions about the whole audit exercise.
In describing the issue sparked by online news portal Malaysiakini (which was then followed up by other media houses) as “barking lounder than its bite”, UOB Kay Hian Research clarified that the glove maker has in fact scored a rating of “A” (nine), “C” (one) and “D” (two) in 12 audit areas.
“Therefore, we believe that the online news portal’s article did not wholly reflect Top Glove’s largely positive audit compliance and to a certain extent misrepresented it,” wrote analyst Philip Wong in a company update.
“More importantly, these infringements to the audit are in the midst of being resolved and therefore, (are) temporary in nature.”
According to the research house, Top Glove scored a “C” rating for discrimination by conducting pregnancy test on local workers when the justification is to allocate lighter task and work that does not expose to chemical related work.
As for the two “D” scores, this is due to (i) subjecting workers to working overtime regularly even though the workers have the options to opt out, and (ii) in the area of health and safety (issue arose as a worker did not hear the fire alarm and another could not differentiate between the fire alarm and the production line problem alarm (Top Glove is in the midst to rectify the alarm system for better differentiation between the alarms).
For the record, the Malaysiakini-initiated report claimed that BSCI had downgraded Top Glove’s rating to “D” from “A” in its recent audit review. Top Glove’s “A” rating was obtained on June 20 this year.
The Amfori BSCI audit was set up to monitor and assess workplace standards across the global supply chain with ratings ranging from “A” to “E”.
Considering the issue as “insignificant and will be resolved by Top Glove over the near term”, UOB Kay Hian Research has left its earnings forecasts for Top Glove unchanged with key downside risks to include (i) swift containment of the COVID-19 outbreak; (ii) disruption to its production or supply chain caused by the COVID-19 outbreak; and (iii) COVID-19 vaccine discovery.
All-in, the research house maintained its “buy” rating on Top Glove with a target price of RM12.30.
At the close of morning trading, Top Glove was down 4 sen or 0.48% at RM8.28 with 12.85 million shares traded, thus valuing the company at RM67.84 bil. – Nov 4, 2020
