Top Glove falls despite labour resolution as it cuts listing size

• Top Glove Corporation Bhd. (SGX: BVA) share price tumbles 1.1% in Singapore
• The Malaysia stock (KLSE: 7113) sinks to RM5.80 per share on Tuesday
• Its Hong Kong listing will raise US$889.1 million, down from US$1.9 billion
• The glove maker said all its forced-labour issues have been resolved
• Buy and sell Top Glove stocks with an IG account

Top Glove shares lose ground

The world’s biggest manufacturer of medical gloves saw its dual-listed shares languishing on Tuesday.

On the Singapore Exchange, Top Glove was trading at S$1.88 as of 15:50 SGT, down 1.1%, on volume of 5.8 million shares. In Malaysia, the counter dropped 1.7% to RM5.80 as of 15:38 SGT.

Concerns over alleged labour abuses, among its 21,000-strong workforce, had driven Top Glove shares to lose over 6% year-to-date, Reuters reported.

Among 22 analysts, 13 had ‘buy’ or ‘overweight’ recommendations on the Malaysia-listed stock, seven rated ‘hold’, and two had ‘sell’ calls. Their average target price was RM6.47, according to Wall Street Journal data.

Top Glove reduces Hong Kong deal proceeds

The glove manufacturer recently cut the size of its Hong Kong listing by almost half, citing concerns over shareholder dilution.

Late last week, Top Glove’s board slashed the issuance of new shares to up to 793.5 million, down from nearly 1.5 billion as announced in February.

The listing size will now be US$889.1 million, instead of US$1.9 billion previously.

About 60% of the proceeds will go into expanding production capacity and developing a data-driven manufacturing system.

Top Glove plans to list in Hong Kong by June, and its application is being vetted by the city’s bourse operator, Reuters reported.

Top Glove scores ‘green’ on forced-labour indicators

On Monday, Top Glove announced it had resolved all 11 International Labour Organization indicators of forced labour. This was verified by independent UK consultant, Impactt Limited.

The Malaysian firm engaged Impactt in July 2020 to advise on improving its labour policies and practices, after the US Customs placed two of its units’ products on an import ban due to suspicions of forced labour.

According to Impactt’s report, Top Glove achieved ‘green’ for the 11 indicators, which meant all issues have been closed. The indicators included excessive overtime, abusive working and living conditions, debt bondage, withholding of wages, and intimidation.

In August 2020, for most of the indicators, Top Glove scored ‘dark yellow’, ‘orange’ or ‘red’, suggesting that critical issues were present.

The US extended its ban last month to all disposable gloves originating from Top Glove factories in Malaysia, saying it had sufficient information to determine labour abuses.

Citi analysts on Tuesday wrote that although ‘Top Glove is not out of the woods just yet’, the latest resolution of the indicators ‘is certainly a positive one’, and should move the group closer to a lifting of the US ban.

It could also potentially allay the ESG (environmental, social and governance) overhang on the stock, Citi said. The analysts gave a ‘buy’ rating and RM9.80 target on Top Glove shares.

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