MIDF Research downgrades Supermax to ‘trading sell’, target price revised downward

The US Customs and Border Protection issued a ‘Withhold Release Order’ that prohibits imports from Supermax based on reasonable information that indicates the use of forced labour in the company’s manufacturing operations. — Picture via Supermax
The US Customs and Border Protection issued a ‘Withhold Release Order’ that prohibits imports from Supermax based on reasonable information that indicates the use of forced labour in the company’s manufacturing operations. — Picture via Supermax

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KUALA LUMPUR, Oct 22 — MIDF Research has downgraded Supermax Corporation Bhd to a ‘trading sell’ recommendation from a ‘neutral’ as the company could face substantial impact from the United States Customs import ban.

It revised down the target price (TP) for the share to RM1.67 from RM2.72 per share previously.

According to reports, disposable gloves produced by three Supermax units were banned by the United States Customs and Border Protection (CBP) based on information indicating its use of forced labour in manufacturing operations and its products were detained at all US entry ports since Oct 21.

The CBP identified 10 of the 11 International Labour Organisation’s (ILO) indicators of forced labour during its investigation.

The CBP identified 10 of the ILO’s indicators of forced labour during its investigation.

Supermax’s representatives in the US are currently in touch in the US CBP to obtain more clarity and information on the Withhold Release Order (WRO) issued and the required measures going forward.

On Thursday, the company, in a filing with Bursa Malaysia, said it had embarked on its undertaking to meet the International Labour Organisation (ILO) standards on migrant workers since 2019.

“We opine that Supermax has not kept up with its peers to improve its environmental, social, and governance (ESG) aspects even though it reportedly had embarked on attempting to meet ILO standards on migrant workers since 2019,” said MIDF Research.

Currently, about 20 per cent of the Supermax Group’s sales go to the US market.

Meanwhile, CGS-CIMB Securities Sdn Bhd has reiterated a ‘hold’ recommendation with a lower TP of RM2.16 from RM3.20 previously, and Kenanga Research maintained a ‘market perform’ recommendation with a lower TP of RM2.15 from RM2.35 previously. 

As at 10.08am, the share price of Supermax dropped two sen to RM2.04 with 2.49 million shares transacted. — Bernama

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