KUALA LUMPUR: Property developer Mah Sing Group Bhd is branching out to glove production, expecting the new business to contribute 25 per cent to its net profit overtime.
Mah Sing announced the diversification today but will need approval from the company's shareholders at a forthcoming extraordinary general meeting.
The new venture is undertaken through Mah Sing Healthcare Sdn Bhd, a direct subsidiary of Mah Sing Plastics Industries Sdn Bhd.
Chief executive officer Datuk Ho Hon Sang said Mah Sing would allocate RM150 million capital expenditure to set up the first glove manufacturing factory in Kapar, Klang.
The factory will house 12 new production lines with an annual capacity of 3.68 billion pieces of gloves, or 38,000 pieces per production line per hour.
Mah Sing will leverage on its experience as a plastics manufacturer over the past four decades, supported by potential synergies from its property business.
"We have planned everything in detail and swiftly including purchasing of new glove manufacturing machineries and entering into letters of intent (LoI) with suppliers for supply of both nitrile-butadiene rubber and latex raw materials when operation commences," Ho said at a virtual press conference on the new venture yesterday.
He said the first six production lines were expected to be ready for operation as early as the second quarter (Q2) of 2021, followed by another six production lines by Q3 2021.
"We expect the revenue contribution to come in as early in Q2 2021. This will provide more recurring income to the group," Ho added.
Mah Sing plans to raise RM100 million via convertible bond for the new business.
It could also tap into its cash reserve of RM1.13 billion as at June 30 this year.
The company said it was applying US Food and Drug Administration (FDA) and CE Europe's certification to export its nitrile and rubber gloves.
According to Malaysian Rubber Glove Manufacturers Association, the rubber glove industry has seen an average of 8.0 per cent to 10 per cent growth for the past 25 years even before the Covid-19 pandemic.
"The demand for gloves is expected to remain strong post-pandemic especially with the increase in awareness of the importance of hygiene practices, especially in emerging markets where the glove consumption per capita is still low as compared to developed countries," Ho said.
"We aspire to expand gradually to 100 production lines. In line with our growth strategy, we also aim to be one of the top five producers in Malaysia in the future," he said.
Mah Sing founder and group managing director Tan Sri Leong Hoy Kum said the new factory would be expedited as "the company has planned everything including securing the new machineries and raw materials."
"There is excess demand now as the top four producers' supply lines are booked solid into 2021 and even early 2022.
"We are optimistic in the prospects of our new venture and if demand permits, we will gradually expand up to 100 production lines as part of our future expansion plan," Leong said.
The 100 production lines could potentially produce up to 30 billion pieces of gloves per annum.
"We can even explore specialty 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," added Leong.