Iconic Worldwide to prove doubters wrong with glove move

This article first appeared in The Edge Malaysia Weekly, on November 23, 2020 - November 29, 2020.
Iconic Worldwide to prove doubters wrong with glove move
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PROPERTY developer Iconic Worldwide Bhd has the ambitious target of becoming one of the world’s top five rubber glove manufacturers. Group managing director and major shareholder Datuk Lucky Tan Kean Tet acknowledges that there will be doubters and sceptics along the way, but he intends to prove them wrong.

“We understand that some people may have doubts or remain sceptical about our business diversification into the PPE (personal protective equipment) industry. Some investors also have concerns about whether there will be too many new players and glove wannabes, which may lead to overcapacity in the market. But frankly, we are not worried at all,” he tells The Edge in a video interview.

According to Kean Tet, Iconic Worldwide will be spending a total of RM155 million to build the PPE manufacturing facilities on a 5.53-acre land parcel in Batu Kawan, Penang. Its plan is to produce 3.1 billion to 3.5 billion pieces of gloves and 220 million pieces of face masks every year.

He highlights that Iconic Worldwide has secured orders from Europe and the US.

“Although our planned 12 production lines have yet to be completed, the orders that we have received are already more than what we are capable of producing, which is why we plan to further increase our production capacity,” he says.

In fact, Kean Tet says that Iconic Worldwide’s ultimate target is to become the fifth largest glove maker in the world, as the group has set its sights on producing 15 billion to 16 billion pieces of gloves by 2025.

“That’s about five times bigger than our upcoming capacity of 3.1 billion to 3.5 billion pieces. If we could achieve 15 billion to 16 billion pieces, I am pretty sure that we could command a global market share of about 5%.

“I know there are many people out there who may think we are overly optimistic, but to put things into perspective, the global demand is 330 billion pieces of gloves per annum, of which 67% will be produced by Malaysian glove makers. Global demand is expected to increase by 10% every year, and with the pandemic factor, we think it could increase by 20% every year,” he elaborates.

As at last Wednesday, the 58-year-old ­aquaculturist-turned-property developer owned 24.66% equity interest in Iconic Worldwide. His daughter, Katherine Tan Seok Ying, and son, James Tan Cho Chia, sit on the company’s board as executive directors.

Kean Tet emerged as a major shareholder in Iconic Worldwide (then known as Sanbumi Holdings Bhd) in January 2019 following a private placement exercise. He was appointed to the board in April that year.

A name change and pivot to property development and investment ensued for the group.

Kean Tet is the founder and chairman of Iconic Group, one of the leading property firms in the north of Peninsular Malaysia. He ran his own aquaculture companies for over 20 years, before starting Iconic Group about a decade ago.

To date, his privately-owned Iconic Group has completed projects with a gross development value (GDV) of about RM600 million, while its ongoing projects have a total GDV of around RM400 million. Some of the projects completed by the company include Icon City, Iconic Hotel, Iconic Skies and Iconic Vue.

Notably, the listed Iconic Worldwide is undertaking a mixed-development project — dubbed Iconic Point — on a piece of freehold land in Simpang Ampat, Seberang Perai, Penang. Iconic Point, which has a GDV of RM139.5 million, is a 65:35 joint venture between Iconic Worldwide and Iconic Group.

Significant contribution in FY2023

Iconic Worldwide returned to the black with a net profit of RM8.03 million in the financial year ended March 31, 2020 (FY2020). It continued to generate a net profit of RM1.27 million in the first quarter ended June 30, 2020 (1QFY2021).

Based on current average selling prices, Seok Ying estimates that the output of 3.1 billion to 3.5 billion pieces of gloves could translate into a revenue of RM1 billion and profit of RM450 million in the financial year ending March 31, 2023 (FY2023).

“Our estimated annual production capacity for 12 lines will be about 3.1 billion to 3.5 billion pieces of gloves, mainly nitrile gloves. We expect a fairly attractive profit margin of 45%,” she says.

Of the RM155 million investment in its PPE expansion, the land cost is RM12.53 million, the construction cost of the manufacturing facilities will be about RM60 million, and the 12 production lines to produce gloves, as well as 10 pieces of equipment to produce face masks, will cost RM80 million to set up.

As Iconic Worldwide has just raised RM43 million through a private placement exercise, Seok Ying says the remaining RM112 million will be funded in equal parts by bank borrowings and internal funds. According to AbsolutelyStocks data, Iconic Worldwide was in a net cash position of RM23.5 million as at June 30 this year.

“We have started piling works on the Batu Kawan land, which should be completed by next month (December). Then, we will start putting up the factory. Our target is to install six production lines for gloves in April next year, and to commence operation in October. Subsequently, we will gradually install the remaining six production lines by the first quarter of 2022,” she adds.

On the face mask business, Cho Chia says Iconic Worldwide’s planned production capacity is 220 million pieces annually.

“This would translate into a revenue of RM100 million. In fact, we have already started producing face masks at a rented factory in Prai,” he points out.

Cho Chia concedes that making face masks is a relatively easier business to operate, and therefore, it is mostly developed internally. The production of gloves, however, requires external expertise because it is a more complicated manufacturing process.

“We hired a very experienced glove industry consultant, as well as a plant manager who has good connections in the industry, on a contract basis to assist us with the business diversification. We are assembling a team of experts to do this,” he explains. Cho Chia stresses that Iconic Worldwide is serious about its diversification into the PPE business, and not merely jumping onto the bandwagon.

Since the outbreak of the Covid-19 pandemic, the property and hotel industries have been badly affected. Fortunately, he says, Iconic Worldwide has sold off all its properties at Iconic Point.

“Having said that, we have to find other ways to survive, and we have to protect the jobs of our employees. That is why we have decided to venture into the PPE business. About 30% of our hotel employees could lose their jobs if we don’t diversify. Now, with our business diversification, they will be transferred to our PPE division,” he says.

His father concurs. “It is about the survival of our company, embracing change for the future of our employees, and more importantly, helping our medical front liners fight the pandemic. After taking all these into consideration, we think our business diversification is the right move and it will eventually benefit the group,” Kean Tet concludes.



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