KUALA LUMPUR (Dec 1): Integrated construction engineering group Vizione Holdings Bhd has allocated RM30 million to capital expenditure for its recently acquired glove manufacturer, to boost its annual production capacity more than threefold to 1.6 billion pieces of gloves over the next 18 months, from 500 million pieces currently.
The capex was announced after Vizione's wholly-owned subsidiary VIP Index Sdn Bhd inked a deal to buy a 51% stake in glove manufacturer SSN Medical Products Sdn Bhd for RM5 million cash today.
In a virtual press conference today, Vizione managing director Datuk Ng Aun Hooi said this is a golden opportunity for Vizione to venture into the glove-making business as demand for gloves is expected to remain robust amid rising Covid-19 cases around the world.
The capex injected into SSN will add another six lines equipped with advanced machinery, for a total of 12 lines.
Furthermore, he said that the optimism about the glove business venture is supported by a one-year profit guarantee, whereby SSN shall achieve a profit before tax of RM15 million for the financial year ending Dec 31, 2021 (FY21).
Also, he added that the acquisition of a 51% stake in SSN is seen to be earnings accretive for Vizione as SSN has a glove business running currently, which will be able to contribute to Vizione's top and bottom lines immediately.
Despite lower profit guarantee, SSN executive director Clinton Ang Teck Leong said the company is targeting to achieve a profit before tax (PBT) of up to RM30 million in FY21 on the back of a revenue projection of between RM100 and RM120 million.
It has an even more ambitious target for FY22, as Ang has projected PBT to more than triple to RM100 million on a revenue projection of RM200 million.
Ang said the profit projection came after SSN's glove factory capacity was fully booked until the third quarter next year, while its additional incoming capacity will also be secured from its existing clients given the strong demand for gloves.
When asked about oversupply issues in the glove industry with so many new entrants, Ang replied that he is unfazed by the situation, as he believed that the demand for gloves is unlikely to taper off even after Covid-19 vaccines are available because glove use will increase as the masses rush to be vaccinated.
Meanwhile, on the construction outlook front, Vizione's Ng said political stability is an important indicator for the recovery in the industry.
He has confidence in the Perikatan National government to deliver more construction projects next year after the Budget 2021 is passed.
Currently, it has a tender book of over RM2 billion, mostly from government projects such as hospital projects, infrastructure works and housing projects. It expects to achieve at least 20% of success rate.
Meanwhile, Vizione has an order book of about RM1.8 billion, which Ng expects will continue to provide earnings visibility for the group.
The share price of Vizione closed up half a sen or 1.18% to 43 sen today, bringing it a market capitalisation of RM338.32 million.
Year-to-date, the counter has declined 32% from 63 sen on Jan 2.