• According to media reports, a total of 28 Top Glove’s factories in Klang — 19 of them producing gloves — will be shut down temporarily in stages to enable the Health Ministry to conduct Covid-19 screening and quarantine its workers.
• Senior Minister (Security Cluster) Datuk Seri Ismail Sabri Yaakob said yesterday the action was taken due to the steady increase in positive cases reported among the workers.
• Top Glove has issued a statement saying that the company will work closely and cooperate fully with the relevant authorities to implement the temporary stoppage by stages of its manufacturing facilities in Meru, Klang.
• Since 18 November 2020, Top Glove has temporarily stopped production in 16 facilities in Meru, Klang. The balance of the 12 facilities in Meru have been operating at reduced capacities. Of the 28 above mentioned factories, 19 are glove production facilities with an estimated capacity of over 40bil pieces per annum.
• The company has not revealed the monetary loss resulting from this closure. However, based on our rough estimates, assuming 19 of the 36 glove production factories operating in Meru, Klang are closed for 2 weeks, the total impact to Top Glove’s revenue will be around 2% which is not significant.
• We are not making any changes to our earnings forecasts at this juncture. However, we will monitor closely to assess the total loss and will adjust our numbers accordingly once the official numbers are announced. Maintain HOLD with an unchanged fair value of RM7.88 per share based on a 5-year average PER of 28x

Source: AmInvest Research - 24 Nov 2020