Glove manufacturer Top Glove is set to resume production, under strict adherence to guidelines imposed by the Malaysian-health ministry.
The company’s operations had taken a hit earlier this month after 17 employees had tested positive for the coronavirus.
It has since undertaken deep cleaning and a thorough sanitisation of the affected production sites and living quarters. It adds that contact tracing is ongoing and already-identified employees have undergone testing for Covid-19 and placed on home quarantine while awaiting their results.
To UOB Kay Hian (UOBKH) analyst Phillip Wong, the resultant disruption on operations is “limited”, and “earnings impact is muted”.
“We leave our earnings forecasts unchanged as we believe the development thus far is
immaterial,” says Wong in a Nov 6 note.
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“We believe Top Glove is one of the most insulated glove producers from a COVID-19 outbreak, given its well-diversified production base across 47 factories in four different countries,” he elaborates of his stance.
He estimates that the shutdown of two production sites for two weeks would have an impact of less than 1% of Top Glove’s FY21 earnings.
For its ongoing 1QFY21, Wong expects the company to log earnings of “at least” RM2.5 billion ($8.2 billion). This represents a growth of at least 100% quarter-on-quarter and 1,1505 year-on-year.
These numbers account for 23% of his FY21 earnings estimate, adding that there could be upside potential for further earnings revision.
To this end, Wong has maintained a “buy” call and target price of RM12.30 on Top Glove. This gives the counter a 48.2% upside from its RM8.30 price on Nov 6.
As at 2.52pm, shares of Top Glove was down 10 cents or 3.95% to $2.43 on the Singapore Exchange.
See: Top Glove remains a favourable counter, says Maybank
