THE very fact that Top Glove Corp Bhd executive chairman Tan Sri Lim Wee Chai is mopping up shares in his company is a reflection of his confidence in the company that he founded, thus has a positive impact on minority shareholders.

“He is putting his money where his mouth is,” Minority Shareholder Watchdog Group (MSWG) CEO Devanesan Evanson told FocusM. “He is walking the talk!”

On Tuesday (Dec 29), Lim acquired 3.29 million Top Glove shares at an average price of RM6.07/share.

The transaction which cost RM19.97 mil raised Lim’s direct interest in Top Glove to 2.1 billion shares or 26.2% while his indirect stake currently stands at 691.82 million shares or 8.62%.

Evanson further noted: “He is having more skin in the game. His share purchases is of comfort to minority shareholders and that gives them (minority shareholders) confidence … but the market has a mind of its own.”

In this regard, he reminded minority shareholders to weigh other factors before making their investment decisions and not be lulled into a false state of confidence solely based on the fact that company owners are buying their own shares.

“All things being equal, such action is perceived as Lim is showing confidence in Top Glove … but such action has both a positive and negative connotation,” justified Devanesan.

On the subject of the company’s rampant share buyback exercise, he regarded such move as positive in that the earnings per share (EPS) will go up subsequent to share buybacks and again, all things being equal, this should translate to higher share prices.

On top of Lim’s personal acquisition of Top Glove shares, the company’s own share buyback exercise has raised its net outstanding treasury shares to 178.36 million or an equivalent of a 2.18% stake.

As of Dec 15, Top Glove has spent RM1.28 bil on share buybacks since September with RM354.74 mil spent in September and RM802.55 mil in November.

According to Devanesan, there is also a possibility that these shares may be distributed to shareholders as dividend in specie in the future.

Another alternative is that these shares may later be sold in the market at higher prices thereby increasing the bottom line of Top Glove which again be beneficial to the company’s minority shareholders.

However, Devanesan cautioned that the negative aspect is such that Top Glove is in the business of doing business and not buying back its own shares excessively.

“If you cannot use the cash to do business or for creating a war chest, then just return the cash to the shareholders,” he proposed.

“All-in, minority shareholders prefer Lim to buy Top Glove shares as it is a show of confidence. Share buybacks are not preferred; if you cannot use the cash for business purposes or for a war chest, just return it to shareholders.”

At 10.16am, Top Glove was down 10 sen or 1.63% to RM6.02 with 3.74 million shares traded, thus valuing the company at RM49.37 bil. – Dec 31, 2020

https://focusmalaysia.my/mainstream/mswg-top-glove-is-fortunate-to-have-a-leader-who-walks-the-talk/