KUALA LUMPUR (Sept 8): Loss-making bus operator Gets Global Bhd is jumping on the glove-making bandwagon, following the emergence of Teong Lian Aik as a new substantial shareholder.
It plans to venture into the manufacturing, sale and marketing of gloves and other related activities, the group said in a filing with Bursa Malaysia today.
To fund this new venture, the group has also proposed a private placement of 158 million new shares at 55 sen per share to its major shareholder ADA Capital Investments Ltd as well as Beh Boon Seong, Tan Chai Chek and Chua Choy Guan.
ADA Capital is controlled by Low Bok Tek, who is the brother-in-law of Teong. Low was the founder of glove maker Latexx Partners Bhd, which was delisted from Bursa Malaysia in 2013.
Beh, Tan and Chua are independent third-party investors who are not related to the joint offeror.
The proposed private placement, which represents 55.63% of the total enlarged issued shares, is expected to raise gross proceeds of up to RM86.9 million, which are more than Gets Global's current market capitalisation.
The group intends to use RM38.9 million of the proceeds for the construction of glove manufacturing facilities and capital expenditure for the glove business, RM20.9 million for working capital for the glove business, and RM7.75 million for working capital of the existing bus operations.
Another RM19.1 million will be used for the repayment of bank borrowings, the group said.
Gets Global said it intends to leverage on the combined experiences of Teong and Low, especially Teong's prior experience in the construction of the glove manufacturing facilities and Low's expertise in the manufacturing of gloves and his in-depth knowledge and production know-how in the glove business.
Gets Global said the board is of the view that the proposed diversification allows the group to capitalise on the favourable long-term prospects of the glove industry.
The group intends to construct a new glove manufacturing plant with an estimated built-up area of 520,000 sq ft and is capable of housing up to 12 glove-dipping lines on the industrial land currently owned by the group to undertake the glove business.
Subject to obtaining shareholders' approval for the proposal at an extraordinary general meeting to be convened, the construction of the glove manufacturing plant is expected to commence by the fourth quarter of this year and will start commercial operations by the second quarter of year 2021.
Barring any unforeseen circumstances, the board anticipates that the group's glove business may contribute to 25% or more of net profit to the group.
"Furthermore, the board anticipates that the glove business will largely contribute to the group's earnings in the future given its intention to expand and increase its production capacity to generate higher sales," said Gets Global.
Gets Global has been in a loss-making position since 2016. For the cumulative six months ended June 30, 2020, it posted a loss before tax of RM18.92 million, wider than the RM10.5 million recorded a year ago.
Shares in Gets Global closed half a sen or 0.76% higher at 66.5 sen today, valuing the company at RM83.79 million.