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KUALA LUMPUR (Dec 4): Tropicana Corp Bhd, of which tycoon Tan Sri Lim Wee Chai is the chairman and a substantial shareholder, bought shares of Top Glove Corp Bhd worth RM78.47 million on the open market yesterday .
Lim, who has an 11.07% stake in Tropicana, is also the president and founder of Top Glove, in which he controls 25.68%.
In a filing, Tropicana said it had purchased 11.25 million Top Glove shares “at prevailing open market prices” through its indirect ownership Desiran Reality Sdn Bhd.
According to an initial calculation, the property developer paid an average of RM6.97 per share for the lot, representing a 0.14% stake in Top Glove.
The announcement has put the spotlight on Tropicana, a real estate company Lim bought in October 2017 from Tan Sri Danny Tan Chee Sing and his two related companies, Golden Diversity Sdn Bhd and Aliran Firasat Sdn Bhd.
The two moguls did not disclose the transaction price for Tropicana shares at the time. Based on the 93 sen closing when the deal was announced, Lim’s 10.24% stake would cost him RM139.6 million about three years ago.
At the time, many asked why Lim bought the debt-laden real estate developer. Similarly, many are now raising questions about Tropicana’s justification for buying Top Glove stock and when it did so. Want to follow in the footsteps of Mah Sing Group Bhd to diversify into rubber glove manufacturing to cultivate a new source of income?
Tropicana said the acquisition will allow it to capitalize on the glove maker, which has favorable long-term prospects amid increased global demand for its products.
“The acquisition may allow Tropicana to benefit from glove manufacturing and marketing prospects, which is largely due to increased global demand for gloves due to the ongoing Covid-19 pandemic and also to the growth of the glove industry. global health services “explained.
The purchase of shares was financed with internal funds. Still, Tropicana doesn’t seem to have a wide variety of investments. Given the prolonged weak housing market, many players tend to save cash to get through the current tough time.
Tropicana’s balance sheet as of September 30 showed that its cash balance amounted to RM703.8 million. However, its long-term loans increased to RM2.82 billion from RM1.57 billion a year ago, while its short-term liabilities decreased to RM528.7 million from RM942.2 million. On top of that, the developer has issued RM248.2 million perpetual bonds.
In addition, it is worth noting that the stock purchase was made shortly before the announcement of Top Glove’s quarterly results which is scheduled for next Wednesday, December 9.
According to Tropicana, Lim had voluntarily abstained from deliberating and voting on the acquisition.
“The board, with the exception of Tan Sri Dr. Lim Wee Chai having considered all aspects of the proposed acquisitions, is of the opinion that the proposed acquisitions are in the best interest of Tropicana,” he added.
Shares of Top Glove, whose subsidiaries are being investigated by the government for worker housing problems, have come under pressure recently.
Top Glove’s share price has fallen 29.4% from its all-time high of RM9.60 on October 19 to RM6.78 on Thursday, giving it a market capitalization of RM55.57 billion. Despite the fall, so far this year the stock continues to rise more than 300%.
In addition to the news of the vaccine discovery, which has weighed on the stock, an increase in Covid-19 infections among its workers that resulted in the temporary closure of 28 of its factories, accounting for about half of its production capacity. It has also been a drag on the accountant.
In addition, the spike in infections has prompted the Human Resources Ministry to investigate six of its subsidiaries, which found they were housing their workers in congested and uncomfortable accommodations that lacked adequate ventilation. This, the ministry said Tuesday, was a violation of minimum standards for housing and worker comforts, as provided by law.
To stop its share price from falling, Top Glove has been on a share buyback spree. Since September, it has paid out RM1.28 billion for the year.
Given the uncertainties on the horizon, the question arises whether it is prudent for Tropicana to spend to buy Top Glove stock.
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