Top Glove hits limit down after legal action over Aspion deal
Firm claims irregularities in certain balance sheet items of Aspion
TOP Glove Corp Bhd shares hit limit down yesterday after the company claims there is a conspiracy to defraud it in relation to its RM1.37 billion acquisition of rubber glover producer Aspion Sdn Bhd.
The stock fell as much as RM3.63, or 30 per cent, to RM8.47, before regaining some losses to settle at RM9.03 at 11.25am with more than 26 million shares traded.
Bursa Malaysia suspended the trading of Top Glove shares for the rest of the day.
It said in a statement the proprietary day trading and intra-day short-selling of Top Glove’s shares had been suspended for the rest of the day, as the last done price of the approved securities had dropped more than 15 sen, or 15 per cent, from the reference price.
The trading of the stock will resume today.
Last Friday, Top Glove announced it had filed a writ action against Singapore’s Adventa Capital Pte Ltd and its directors to claim back at least RM714.86 million from the Aspion acquisition.
Top Glove claimed that Aspion directors Low Chin Guan and Wong Chin Toh had made fraudulent misrepresentations.
In a separate statement yesterday, Top Glove said it discovered irregularities in certain balance sheet items of Aspion after completing the deal on April 4. It said the RM714.86 million was brought about by the overstatement of assets and overvaluation of Aspion.
“Upon such discovery, Top Glove conducted its own investigations and appointed an independent accounting firm to investigate the irregularities in Aspion’s accounts as well as the possible overstatement of the acquisition price for Aspion.”
Top Glove added that there was an overstatement of inventory, plant and machinery in Aspion’s accounts amounting to RM74.4 million.
The interim report also stated that the acquisition price of Aspion was overstated by RM640.5 million.
Meanwhile, analysts said the litigation came as a surprise and raised uncertainty over Aspion’s future operations and earnings outlook, although Top Glove maintained that the move would not impact Aspion’s operations.
Kenanga Research kept its financial years 2018 and 2019 earnings forecasts and target price of RM9.40 unchanged, pending further clarifications from Top Glove management.
Nevertheless, the firm said for illustrative purposes, if it stripped out the profit guarantee and assumed normal profits generated from Aspion, its 2019 financial year earnings could be lowered by 12 per cent and target price lowered to RM8.25.
“(And) assuming Top Glove is unable to recoup the claims made, an impairment charge of RM714.9 million (assuming the worst-case scenario) will erode its book value by 31 per cent from RM1.77 per share to RM1.21 per share as at May 31,” it added.