KUALA LUMPUR: Maybank Investment Research has downgraded Top Glove Corp Bhd
to hold in light of Top Glove taking legal action against the vendors of Aspion Sdn Bhd.
It said this was due to the reduced upside to its fair value and the uncertainties surrounding Aspion following the legal action against the vendors, comprising Adventa Capital Pte Ltd, Low Chin Guan, Wong Chin Toh and ACPL Sdn Bhd.
The research house said in its Monday report it is unclear what issues prompted the legal action, which claims a sum of not less than RM715mil.
Maybank Investment noted that Top Glove cited “conspiracy to defraud Top Glove” and “fraudulent misrepresentations made by Low Chin Guan and Wong Chin Toh, which resulted in Top Glove agreeing to purchase Aspion”.
"Our FY18-20 EPS forecasts have already imputed Aspion’s profit guarantee of MYR81m and MYR108m for FY10/18-19. Stripping this out, our FY18-19 EPS forecasts for Top Glove would be reduced by 8% and 20% respectively," said the research house.
However, Maybank Investment noted that any shortfall in the profit guranratee is supposed to be satisfied by cash refund from the vendors.
"Furthermore, if Top Glove is successful in claiming back >MYR715m, its interest savings would be c.MYR22m p.a. (or 4% increase to our FY19E EPS)."
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