KUALA LUMPUR: Kossan Rubber Industries Bhd has a below average environmental, social, and governance (ESG) scoring due to the lack of medium to long term strategy for ESG.
Maybank Investment Bank (MaybankIB) in its report said Kossan however has been strengthening its sustainability infrastructure, carbon accounting mechanism, data collection and disclosure and is expected to see improvements in the company's with the anticipated launch of its sustainability strategy and blueprint.
MaybankIB has a 38 score for Kossan.
"Kossan has indicated its intention to launch the Kossan Sustainability Strategy and Blueprint and introduce sustainability- related KPIs for its management in 2023.
"All of these initiatives, once detailed, can be expected to improve its ESG scoring going forward," it said in a note. Maybank IB said Kossan's overall ESG score of 38 is below average and is currently trailing the ESG scores of its sector peers, namely Top Glove Corp Bhd who scored a 61.
While it has adopted initiatives to enhance its sustainability infrastructure, the bank said the lack of disclosures on medium and long-term ESG targets has dragged its scoring compared to its peers. "Additionally, Kossan's board composition is not as diversified as that of Top Glove and Hartalega Holdings Bhd, which have more independent non-executive directors and female representation," it said.
Meanwhile, Maybank IB said Kossan has the strongest balance sheet among glove makers under its coverage with RM2.1 billion net cash (81 sen/sh) as at Dec 2023.
Coupled with its technological know-how, it said Kossan would be able to raise its automation and digitalisation across its entire operation.
"This would result in higher productivity, lower headcount and better cost competitiveness. We continue to maintain our earnings forecasts, RM2.08 target price with a hold call," it added. Ends