Yes, you can install the covering over the asbestos. It must be done without disturbing the existing covering to prevent dust. The dust is the harmful part. It’s up to you when this is most suitable during the installation.

I worked in asbestos abatement for years. Yes, you can put gyp rock over the walls but you’ll have to glue it on. You’ll have to be extra careful when drilling holes for water lines or screwing in light fixtures, etc., or you’ll create asbestos dust. In some states, you can remove it yourself if the asbestos content is less than 3%. It’s such a tiny space, why don’t you just get pricing for removing the asbestos walls then all worries are over.

you should remove the asbestos as it is very bad for your health. If your going to renovate its no big deal. Make sure you wear the proper clothing and a mask. then resheetrock the walls, then put the toilet etc in.