16 Oct 2020

Mah Sing Group Bhd, a property developer, has its eyes set on becoming a rubber glove manufacturer with a production of 30 billion gloves per year.

At a signing ceremony yesterday, it announced plans to diversify into glove manufacturing and other related healthcare products via subsidiary Mah Sing Healthcare Sdn Bhd to take advantage of the boom in glove demand caused by the coronavirus (Covid-19) pandemic.

“In view of the promising global prospect and vibrant glove business, we are committed to being a long-term player and delivering greater value to our shareholders, as well as striving to be one of the prominent glove manufacturers in the industry, moving forward.

“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 Mah Sing founder and group managing director Tan Sri Leong Hoy Kum.

For a start, CEO Datuk Ho Hon Sang explained that Mah Sing has allocated about RM150mil to set up the first phase of its glove-manufacturing factory in Klang that will have a production capacity of 3.68 billion gloves per year.

The factory is expected to start its operations in the second quarter of next year. Phase one of its expansion into glove manufacturing would see the production of 3.68 billion gloves at 12 production lines.

“The phase two expansion is targeted to happen when demand outstrips supply for phase one, ” he told reporters, adding that phase two would see another 3.68 billion pieces of gloves per annum being added to its capacity.

Mah Sing signed several agreements yesterday, including a letter of intent (LoI) with several raw material suppliers for the supply of both nitrile butadiene rubber and latex rubber, as well as machinery for the factory.

The group said it had also secured LoIs from several prospective customers and the cumulative indicative orders have already exceeded the estimated maximum capacity for both phases of the Kapar factory.

“As a new player, the group is in a good position to take advantage of the spot price of gloves, which is about US$80-US$160 per 1,000 pieces, ” Ho said.

Mah Sing expects the glove-manufacturing business to be able to generate a revenue for the group relatively quickly, with the projected contribution estimated to come in as early as the second quarter of 2021.

This came in light of the softening property market led by the Covid-19 fallout.

“The group anticipates that the proposed diversification can help mitigate the potential downside risk to the group arising from wide-ranging effects of the Covid-19 pandemic on the local and global economies, ” Mah Sing said.

The Covid-19 pandemic has seen a surge in demand for rubber gloves that sent the share prices of local glove manufacturers skyrocketing. Malaysia’s glove export has increased nearly 20% to 230 billion pieces currently, up from 192 billion pieces in 2019 amid the heightened global demand for medical gloves among medical professionals due to the prolonged pandemic.

The global demand for gloves is expected to reach 330 billion pieces this year, an increase of 11.49% from 2019’s 296 billion pieces of gloves, giving Malaysia a 67% market share.

Top Glove Corp Bhd and Hartalega Holdings Bhd are among the top-five largest companies on Bursa Malaysia based on market capitalisation.

“Based on our 40 years of being in the plastic product manufacturing business, we feel that we can enter it (glove manufacturing). Our turnaround period is also very fast, ” Leong said.

He said the group was mulling spinning off its glove-manufacturing division into a separate listed entity in the future.

Meanwhile, Ho said the company had already applied for the necessary certification for its gloves, including from the United States Food and Drug Administration.

He believes the shortage of gloves will persist for a long time, even if a vaccine for the virus becomes available.

Mah Sing will seek the approval from its shareholders for the new business venture at its forthcoming extraordinary general meeting as the contribution from the business diversification is expected to be 25% or more of the group’s net profit.

Mah Sing Healthcare has already obtained the interim approval from the International Trade and Industry Ministry (Miti) for the manufacturing licence for surgical, examination and other gloves. Shares in Mah Sing closed unchanged yesterday at 72.5 sen per share, valuing the company with a market capitalisation of RM1.76bil.

Source: The Star, 16 Oct 2020