Top Glove held a briefing concerning the CBP’s findings on forced labour to outline the actions taken to rectify labour issues. Top Glove actions include remediation payments to workers, improving internal labour policies and upgrading workers accommodations. We are positive on these efforts from Top Glove concerning worker rights. We maintain our BUY with unchanged TP of RM7.00.

Top Glove held a briefing giving an update on the US Customs Border Protection (CBP) withhold release order (WRO) issue. Apart from management, migrant worker rights activist Andy Hall was also invited to speak at the briefing.

11 forced labour indicators. Of the 11 forced labour indicators flagged up by the International Labour Organization (ILO) previously, Top Glove have shown significant improvement, rectifying 6 issues and making significant improvements in the other 5 (Figure #5). With regards to the remaining five indicators, Top Glove have outlined actions to resolve these:

- Retention of identity documents: Top Glove have requested that Indonesian recruitment agents return workers’ identity documents.

- Deception: As this was in regards to recruiting agents advertising false claims in job advertisements, Top Glove will ensure job advertisements made by recruiting agents will be factual going forward. Additionally, Top Glove have revised the payment terms to ensure agents have upfront payment for processing candidates.

- Debt bondage: On 2 Apr 2021, Top Glove made lump sum payments to workers for the remaining payments owed.

- Physical and sexual violence & intimidation: Made enhancements to various policies, will launch town hall style meetings, social dialogue sessions for workers to air their grievances and organise training sessions on workplace bullying policies.

Planned improvement in worker accommodations. With regards to Act 446 (Minimum Standards of Housing, Accommodations and Amenities), Top Glove plans on spending RM70m on large hostels in Klang and Banting, with the combined capacity of 7,300. Additionally, Top Glove have recently purchased an apartment in Klang for RM95m with a capacity of 2,700 workers.

Andy Hall says Top Glove improving. To recap, Andy Hall is an independent migrant worker rights specialist who had previously raised concerns about Top Glove’s labour practises. Hall shared that he is greatly encouraged by the actions and plans made by Top Glove’s senior management, acknowledging Top Glove as one of the leading glove players in terms of social compliance currently. Hall even called into question the fairness of the CBP’s findings that Top Glove have been found to use forced labour in their practices.

Withhold Release Order. These developments are positive concerning the CBP’s withhold release order (WRO) being lifted in due course. While Top Glove shared that they are in constant dialogue with the CBP, they have halted all shipments from Malaysia to the US for the time being, in compliance with the CBP’s findings.

Forecast. Unchanged.

Maintain BUY, TP: RM7.00. We are positive on these efforts from Top Glove concerning worker rights. We maintain our BUY with unchanged TP of RM7.00.

Source: Hong Leong Investment Bank Research - 9 Apr 2021