TOP Glove founder Tan Sri Lim Wee Chai must come to realisation – the sooner the better – that he alone cannot rescue the business that he has built with his sweat, tears and blood (metaphorically speaking) from the doldrums.

With 8.01 billion outstanding shares in the open market, the executive chairman of the world’s largest glove maker must come to his senses that only one element can salvage his pride of growing one single plant in 1991 to 49 plants (42 in Malaysia, Thailand [five] China and Vietnam [one each] as of June 1 – MARKET FORCES.

While Lim can demonstrate his passion or care as a business owner to especially to the retail investor fraternity with his constant mopping up of Top Glove shares from the open market, one wonders wouldn’t such purchases hurt the company’s cash flow or if Lim himself is forking out his own money to acquire the shares he bought.

As its share price headed south, so did the share buyback spree with the Top Glove founder having amassed 9.5 million shares in May and another 3.5 million shares thus far in June (as of June 8) which elevated his direct interest in the company to 2.2 billion shares (27.473%) and indirect interest to 680.19 million shares (8.495%).

In a recent article on Top Glove, theedgemarkets.com highlighted how Top Glove’s paper loss from share buyback has jumped to RM1.2 bil as shares from the RM1.42 bil it spent on share buyback over a five-month period until February 2021 are currently valued at only RM236.2 mil.

“This comes as the stock was badly battered and dived to its lowest since December 2017,” observed the business portal.

“The world’s largest glove manufacturer spent the RM1.42 bil repurchasing 200.17 million of its shares. Based on the closing price of RM1.18 on Wednesday (June 8), the shares are worth RM236.2 mil, a difference of RM1.19 bil.”

Interestingly, theedgemarkets.com stressed that Top Glove has previously mentioned that it did not have to book any paper loss from the buyback activity as the exercise is not deemed as an investment.

The group has also referred to paragraphs 33 and 34 of MFRS (Malaysian Financial Reporting Standards) which state that treasury shares are not an investment but rather an equity which is captured at acquisition costs.

Whether futile or otherwise, it is indeed evident that Top Glove’s share buyback exercise has thus far failed to support its share price even if it was intended to signal to investors that its shares are undervalued.

“The management did not create value for shareholders by buying back the company shares at such high valuations,” opined blogger-cum-investor Shak Chee Hoi in his “Fifth Person” blog.

“The money would have been better distributed to shareholders as a dividend if the management was unsure of how to deploy its capital.”

With the release of yet another set of dismal results for its 3Q FY8/2022 ended May 21, 2022 where its net earnings slumped 82.5% quarter-on-quarter (qoq) to RM15.29 mil (2Q FY8/2022: RM87.55 mil; 3Q FY8/2021: RM2.04 bil), one wonders how investors would react to Top Glove’s already ‘rock bottom’ share price.

Outlook-wise, Top Glove expects the challenging business environment to persist in the near term although it emphasised that the situation is a temporary setback.

At time of writing, the counter’s market capitalisation has dipped below the RM10 bil mark which is a stark contrast from Oct 14, 2020 when it was just 52 sen away from toppling Malayan Banking Bhd (Maybank) whose market cap back then was RM81.39 bil as the largest listed entity on Bursa Malaysia.

At 2.56pm, Top Glove was down 6 sen or 4.92% to RM1.16 with 29.88 million shares traded, thus valuing the company at RM9.52 bil. – June 10, 2022