Highlights

PublicInvest Research

Author: PublicInvest   |   Latest post: Wed, 12 May 2021, 9:06 AM

 

Top Glove Corporation Berhad - Updates on US CBP WRO Status

Author:   |    Publish date:


Top Glove held a briefing yesterday to provide updates on the progress of the US Customs and Border Protection’s (CBP) withhold release orders (WRO) status. Last month, CBP imposed a blanket ban on all Top Glove’s Malaysian-made gloves over forced labour issue. However, it was later clarified that no additional forced labour issues were found but some rectification work on existing findings were requested by the CBP. Rectification works are underway and the Group expects to complete it expeditiously. The North American market makes up 22% of Top Glove’s sales, with the recent blanket ban, assuming that 50% of the goods allocated for the US market cannot be sufficiently absorbed by other markets, a 4- week impact will result in less than 1% decline to Top Glove’s FY21F earnings. Taking into account its high dividend yield of 15.6%, we remain positive on Top Glove and we maintain our Trading Buy call, with an unchanged TP of RM7.60.

  • Background. Recall that on 15th July 2020, the CBP has issued a WRO on disposable gloves produced by Top Glove, indicating that the gloves were manufactured with the use of forced labour. At that point, two of its subsidiaries were placed under detention order (accounting for approximately 12.5% of its total sales). Following the ban, Top Glove has engaged Impactt as an independent consultant to help uplift the detention order.
  • Recent incident updates. In January 2021, Impactt found that some of the International Labour Organisation’s (ILO) forced labour indicators pointed out by the CBP were no longer present, while others have seen major improvements (refer to Figure 1). However, CBP, had on 29th March 2021, announced that the ban has been extended to all of the gloves produced by Top Glove in Malaysia. It was later clarified that no additional forced labour issues were found but some rectification work, related to identity documents being retained by agents (affecting less than 1% of its workers), are still needed to be done and Top Glove has requested the agents to return the documents. Remediation payment has also been paid in full on 2nd April 2021, totaling c.RM150m.
     
  • Potential implication. North America accounts for 22% of Top Glove sales. With the recent blanket ban, assume that 50% of the goods allocated for the US market can be diverted to other countries, while the remaining 50% cannot be sufficiently absorbed by other markets; a 4- week impact will result in less than 1% decline to Top Glove’s FY21F earnings.
     
  • Attractive yields. Top Glove has committed to a special dividend payout of 20%, on top of its existing 50% payout as per its dividend policy and would bring the total dividend payout to 70%. We expect the Group to pay out a total DPS of 84.3sen for FY21F, translating to an attractive dividend yield of 15.6%.

Source: PublicInvest Research - 9 Apr 2021

Share this
Labels: TOPGLOV

Related Stocks

Chart Stock Name Last Change Volume 
TOPGLOV 5.35 +0.17 (3.28%) 12,222,500 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
Perform Technical & Fundamental Analysis on Stocks
MQ Affiliate
Earn rewards by referring your friends
 
 

605  230  568 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 FOCUS 0.06-0.005 
 GOCEAN 0.0450.00 
 MTOUCHE 0.285+0.005 
 TANCO-WB 0.07+0.02 
 PERMAJU 0.1450.00 
 TANCO 0.145+0.01 
 MINDA 0.145+0.02 
 UCREST 0.30+0.005 
 TAWIN-OR 0.065-0.005 
 CAREPLS 2.41+0.05 

FEATURED POSTS

1. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!

TOP ARTICLES

1. HOW PUMP AND DUMP SYNDICATES OPERATE IN BURSA, Please Avoid At All Costs, Calvin Tan Research THE INVESTMENT APPROACH OF CALVIN TAN
2. 木材价格暴涨,这家公司竟然没有人买?! Swim With Sharks
3. Are you an INTELLIGENT INVESTOR? You can beat Buffett with THIS STOCK with 100% return in 2 months! Ultimate Stock Tips
4. ARB Berhad – Not As Good As It Seems. Be Cautious. The 1994 Investor
5. U.S. Suffers Sharpest Rise in Poverty Rate in More Than 50 Years - Koon Yew Yin Koon Yew Yin's Blog
6. Calvin replies to CynicalCyan, THE INVESTMENT APPROACH OF CALVIN TAN
7. Number of Covid 19 cases solely depends on Government's efficiency - Koon Yew Yin Koon Yew Yin's Blog
8. World’s most vaccinated nation is spooked by Covid spike (Chinese-made Sinopharm vaccine widely used in Seychelles) News1
PARTNERS & BROKERS