An analyst said the surge in demand for PPE products may only be for the short term and therefore considered “not very viable” for new players.
PETALING JAYA: Companies looking to jump on the personal protective equipment (PPE) bandwagon in view of the Covid-19 pandemic could risk losing out if they are not in it for the long term.
An analyst said the surge in demand for PPE products may only be for the short term and therefore considered “not very viable” for new players.
“We forecast a two-year pandemic period and in a few months, it will be a year. If you enter the market now, it may take three-to-six months to build your factory. By the time it’s ready, there may not be enough time to recoup your investment.”
Another analyst said the PPE segment, especially the rubber gloves sector, is already dominated by big players with the advantage of having economies of scale.
“It’s a numbers game and if you don’t have the know-how or the reach, it’s going to be tough.”
He noted that while the barriers to entry would be low, getting certification for the products can be difficult.
“Entering the business is not expensive. But getting something like FDA (Food and Drug Administration) approval can be a hurdle.”
CGS-CIMB analyst Walter Aw said for newcomers, setting up the PPE manufacturing facilities is a time-consuming process.
“It takes time to build manufacturing plants. Furthermore, it is difficult to say how long the pandemic will last.”
Aw cautioned that demand for PPE such as gloves, hand sanitisers or face masks which are “in hot demand” now, may not be so popular once a vaccine has been found.
“Should that happen, life will normalise once more, ” he said.
In recent months, the global Covid-19 pandemic has seen a surge in demand for PPE such as gloves, hand sanitisers, face masks and ventilators, resulting in both listed and unlisted companies announcing their intention to diversify their existing businesses.
Last month, car leather upholstery maker Pecca Group Bhd announced that its wholly-owned subsidiary, Pecca Leather Sdn Bhd, will repurpose its existing production lines and leverage its in-house talent of craftsmen and facilities to execute the PPE business.
The same month, property developer Permaju Industries Bhd announced that it will be incorporating a wholly-owned subsidiary to venture into glove manufacturing.
Meanwhile, Penang-based tourism and property development outfit Iconic Worldwide Bhd (formerly known as Sanbumi Holdings Bhd) also announced that it is venturing into face mask manufacturing.
In a statement last month, the company said it has plans to increase production to five million face masks a month by the third quarter of 2020.
Meanwhile in April, precision component producer Notion VTEC Bhd announced that it is planning to start producing parts for medical ventilators and PPE. This is in addition to its current core activity of making precision machined components.
Over the past few months, rubber glove companies such as Top Glove, Hartalega, Supermax Corp Bhd and Kossan Rubber Industries Bhd have surged since the start of the Covid-19 pandemic.
Year-to-date, Top Glove’s share price has surged over 400%; Hartalega has risen more than 200%; Supermax has jumped over 1,000% and Kossan has gained more than 300%.
https://www.thestar.com.my/business/business-news/2020/07/29/ppe-not-viable-for-new-players
