KUALA LUMPUR (Oct 15): Property developer Mah Sing Group Bhd announced today its proposed diversification into the manufacturing and trading of gloves and related healthcare products to take advantage of favourable long-term prospects for the glove industry and additional demand created by the Covid-19 pandemic.
In a statement to Bursa Malaysia today, Mah Sing said the diversification will also provide the group access to the global market, thus reducing over-reliance on the domestic market for its property business, which is cyclical in nature.
"The group anticipates that the proposed diversification can help mitigate potential downside risk to the group arising from wide-ranging effects of the Covid-19 pandemic to the local and global economies,” Mah Sing said.
"In view that the group’s contribution from the proposed diversification is expected to be 25% or more of net profit of the group in the future, the proposed diversification will provide an additional revenue stream to the group instead of relying on its current core business, namely the property business. This is part of the group’s business plans to further enhance the group’s financial performance.
"Notwithstanding the proposed diversification, the company will continue with the group’s existing business activities,” said Mah Sing, which also manufactures plastic products.
Mah Sing said its indirect wholly-owned subsidiary Mah Sing Healthcare Sdn Bhd (MSHSB) will acquire 12 new glove production lines that are expected to yield an estimated production capacity of up to 3.68 billion pieces of gloves a year.
According to Mah Sing, MSHSB last Thursday entered into a tenancy agreement with landlord Minho Kilning (Klang) Sdn Bhd for MSHSB to occupy part of a land, measuring approximately 313,548 sq ft, with a single-storey warehouse and double-storey office, within the Ladang Sungai Puloh Industrial Area along Jalan Kapar in Klang, Selangor.
"The signing of the tenancy agreement enables Mah Sing to commence its glove business as glove assets will be set up, installed and commissioned on the property,” Mah Sing said.
Mah Sing said the company will seek approval for the diversification from its shareholders in an extraordinary general meeting (EGM) to be convened based on Bursa’s listing requirements as the contribution from the diversification is expected to be 25% or more of Mah Sing's net profit.
"Subject to all relevant approvals being obtained, the proposed diversification is expected to be completed by the fourth quarter of 2020,” Mah Sing said.
Hong Leong Investment Bank Bhd has been appointed as the principal adviser for Mah Sing’s diversification.
At a virtual press conference today in conjunction with Mah Sing's announcement of the planned diversification, company officials indicated that the glove manufacturing venture is expected, for now, to comprise two phases, resulting in MSHSB having 24 glove production lines with a total annual capacity of about 7.36 billion pieces of gloves.
They said that after the initial 12 glove production lines, the second phase may accommodate another 12 lines and increase the capacity by another 3.68 billion pieces of gloves a year. Gloves produced by MSHSB will be mainly exported to countries including the US and European nations, according to the officials.
"In view of promising global prospects and the vibrant nature of the glove business, we are committed to be 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 can even explore specialty gloves in the future,” Mah Sing group managing director and group chief executive Tan Sri Leong Hoy Kum said.
“Based on our 40 years of being in the plastic [product] manufacturing business, we feel that we can enter it (into glove manufacturing). Our turnaround period is also very fast,” Leong said.
Mah Sing executive director Datuk Steven Ng Poh Seng said the group had allocated RM150 million as capital expenditure for the first phase of the glove manufacturing venture.
Ng said the group’s glove business will be financed via internally generated funds.
At Bursa’s 12.30pm break today, Mah Sing settled up two sen or 2.76% at 74.5 sen, with a market value of about RM1.81 billion. The stock saw some 19 million shares traded.