Top Glove bets on pandemic boom to propel ambitious $1.9-B Hong Kong listing
HONG KONG/SINGAPORE/ KUALA LUMPUR (Reuters) – Malaysia’s Top Glove Corp. Bhd. is betting that pandemic-induced sales can provide enough fuel for its $1.9 billion Hong Kong listing to break through the headwind of US sanctions and the prospect of slower growth as vaccinations become widespread.
Analysts said the unknown pace of vaccination programs mean the world’s largest medical gloves maker could command a higher price for its stock by listing sooner rather than later, while the firm when announcing its plan on Friday talked up post-pandemic sales likely exceeding pre-pandemic levels.
The bullish stance comes even as Citigroup Inc. and UBS Group AG opted out of working on the deal in the wake of the US sanctions on Top Glove over allegations of forced labour practices, people with knowledge of the matter said.
Top Glove’s sales benefited greatly from the COVID-19 pandemic but the company also suffered an outbreak causing 5,000 infections, one death and rebuke from investors including BlackRock Inc.
With vaccination programs underway worldwide, analysts foresee the end of the supernormal cycle for the medical gloves industry, pointing to potential over-capacity and rising costs.
Those concerns have rendered Top Glove stock Malaysia’s most shorted. Short interest is at 2.69 percent of its share capital and 4.2 days of average daily trading volume.
“The company might find it difficult to attract new investors to the Hong Kong offer unless they offer HK shares at a significant discount to the market price due to bad press coverage,” said LightStream Research analyst Oshadhi Kumarasiri, who publishes on Smartkarma platform.
“But at the end of the day, if it’s offered at a substantial discount to the market price, it won’t be that hard to find subscribers.”
Top Glove was in talks with Citi, UBS and China International Capital Corp. (CICC) to manage the listing,
Reuters reported in October. Citi and UBS opted not to sponsor the deal late last year due to heightened concerns about Top Glove’s rubber farming processes and the reputational risk of working with a US sanctioned company, said the people, who declined to be identified as they were not authorized to speak with media.