Glovemakers likely to see orders swell amid Top Glove’s factory shut

by NUR HANANI AZMAN / pic by MUHD AMIN NAHARUL

TOP Glove Corp Bhd’s rival glovemakers are likely to enjoy a fresh wave of orders to cater to demand unfilled by the world’s largest rubber glovemaker due to its 28 factories shutting down.

JF Apex Research head Lee Chung Cheng said other glove manufacturers with ready capacities such as Hartalega Holdings Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd could capitalise on this.

“However, I think this is just an isolated incident. Still too early to say that its peers could benefit from that,” he told The Malaysian Reserve (TMR).

Lee, who has a ‘Hold’ call on the glove sector opined that glovemakers’ share prices are fully valued at this moment.

Top Glove’s share price closed 55 sen or 7.48% lower at RM6.80 yesterday, bringing the group a market capitalisation of RM55.73 billion.

Meanwhile, an analyst with a local brokerage said Top Glove’s factory shutdown wouldn’t hurt the whole sector, but somehow impacts Top Glove’s reputation due to management weakness.

Malacca Securities Sdn Bhd head of research Loui Low opined that the factory closure should not dampen the reputation of Malaysia’s rubber glove product quality.

He said it is still too early to comment on which rival glovemaker is likely to profit from Top Glove’s factory shut.

“It will be around two to four weeks of transitional period. After this event, Top Glove should come back to normalcy.

“As for now, Top Glove has an option to outsource and they can also ramp up in other factories,” he told TMR.

Meanwhile, MIDF Research analyst Ng Bei Shan said Top Glove’s management is working closely with the authorities and are adhering to recommendations and guidelines set by the ministry.

“We also understand that Top Glove is trying its best to fulfil its orders and will ramp up production capacity in factories that are not affected.

“So far, there is no cancellation in orders from its customers,” she told TMR.

According to AmInvestment Bank Bhd, Top Glove, which held an analyst briefing yesterday, is ramping up production outside Klang in Selangor to meet customers’ demand.

“According to Top Glove, of the 28 factories, 20 are glove production facilities with an estimated capacity of about 45 billion pieces per annum.

“Of all glove production facilities in Klang, only 10% of them are operational due to the shortage of manpower,” AmInvestment analyst Thong Pak Leng said in a research note yesterday.

So far, 5,767 workers have been tested and 2,534 are positive cases. The Covid-19 positive workers have been sent to hospitals, while the rest are under quarantine in the company’s newly built apartment and hotels nearby.

The cost of testing is RM150 per worker and is fully borne by the Social Security Organisation.