Mah Sing ventures into rubber glove manufacturing.
KUALA LUMPUR : Mah Sing Group Bhd finally announced its venture into rubber glove manufacturing — something that the market has speculated on for months when the property developer revealed that its plastic division was looking into the healthcare business.
Founder-cum-managing director Tan Sri Leong Hoy Kum is ambitious to be among the top five rubber glove makers in Malaysia with 100 production lines.
For a start, the group’s wholly-owned unit Mah Sing Healthcare Sdn Bhd will be setting up 12 glove production lines in a converted factory in Kapar, Klang, under Phase 1 of the new business. It will have an annual capacity of 3.68 billion pieces.
The first six lines will be ready in the second quarter of 2021 (2Q21), according to Mah Sing, while the remaining six are expected to be onboarded by 3Q21. The investment cost is RM150 million for Phase 1.
Phase 2 of its expansion plan can accommodate another 12 production lines and double its annual capacity to 7.35 billion pieces. Phase 2 will be executed when demand outstrips supply for Phase 1.
For comparison, Top Glove has an annual capacity of 85.5 billion pieces, while Hartalega has produce 39 billion pieces currently.
Speaking at a virtual press conference, Leong said that the new venture is to reduce its reliance on its property development business.
“In view of the promising global prospect of glove business, we are committed to being a long-term player and deliver greater value to our shareholders as well as strive to be one of the prominent glove manufacturers in the industry moving forward.
“We can even explore speciality gloves in the future. We are also planning to venture into other healthcare and medical device-related ventures and explore the possibility of listing our manufacturing division separately from the group to further unlock its value in the future,” said Leong.
Mah Sing needs to seek shareholder approval as the contribution from its business diversification is expected to contribute at least 25% of its net profit.
Analysts and fund managers do not rule out Mah Sing’s chance of succeeding in making the rubber glove business its second income source in the future. However, they said it is too early to draw conclusions given the current abnormal strong demand.
EquitiesTracker Holdings Bhd’s head of research Lim Tze Cheng said that the property sector has been challenging in recent years.
The success of Mah Sing’s rubber glove venture would be dependent on whether its production volume is high enough in order to contribute earnings growth, said Lim.
“The rubber glove business is a volume game, where every sen counts towards your margin,” he explained, noting that the group will also be competing with big boys such as Top Glove Corp Bhd, Hartalega Holdings Bhd, Supermax Corp Bhd and Kossan Rubber Industries Bhd.
Fortress Capital Asset Management (M) Sdn Bhd investment adviser and director Geoffrey Ng opined that to evaluate Mah Sing’s investment would require assessing the gestation period and the supply and demand in the market when its production commences.
“Besides evaluating the merits and economics for the new business venture, investors would also need to assess the group’s capability in manufacturing, which management said it has from its established plastics manufacturing divisions,” said Ng.
Besides setting up the production lines, he noted that the group also needs to comply with the regulatory requirements of each country it is exporting to.
According to Mah Sing, it has signed letters of intent with several prospective customers and cumulative indicative orders of 9.41 billion pieces, which is more than its planned annual capacity.
Will the letters of intent assure earnings visibility of the group’s new venture? Shareholders will know in a year’s time.
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