KUALA LUMPUR (Oct 19): Luster Industries Bhd and Hong Seng Consolidated Bhd have become the latest companies to branch out into rubber glove making.
Luster, in a bourse filing, said it is teaming up with Fortune Tac Sdn Bhd to set up a new firm called Glovmaster Sdn Bhd, with Luster holding a 56% stake and Fortune Tac controlling the rest. Luster is funding RM50 million for the new joint venture.
A 4,013 sq m piece of land in Banting, Selangor has been identified for the new venture.
The group is in the midst of finalising the layout plan of the manufacturing plant, which will have a built-up area of 60,000 sq ft. For now, it is a four-storey building composed of a plant, storage area, as well as offices.
Luster said the new manufacturing plant will house seven double former glove production lines, with an annual production capacity of two billion pieces of nitrile gloves.
Operations are expected to start in the third quarter of 2021.
Luster said that under the agreement signed with Fortune Tac, total glove output within the first two years of the factory’s life will not be fewer than three billion pieces.
Fortune Tac has given a guarantee that the aggregate profit before tax for the first two years of the operations will not be less than RM200 million.
In order to fund its share of Glovmaster, Luster will be launching a private placement involving 482.15 million shares, which at 12.5 sen a share would raise RM60.27 million.
Among those purchasing the placement shares are Luster deputy managing director and executive director Liang Wooi Gee, executive directors Chuah Chong Ewe and Phuah Cheng Peng, and alternate director Chuah Chong San.
Separately, Hong Seng — formerly known as MSCM Holdings Bhd — announced that it is venturing into manufacturing and trading of gloves and other personal protective equipment (PPE) products.
In a filing, Hong Seng said it is also diversifying its business to include the supply of healthcare products and services, as well as hire purchase.
Hong Seng is currently involved mainly in providing business-to-business multi-platform media search solutions, supply chain management, and money lending.
"The group currently derives most of its revenue from its search and advertising business which have been facing erosion of profit margin due to the ever-changing landscape and advancement of technology in the advertising and marketing industry," Hong Seng said.
It added: "The board expects that the demand for gloves will continue in Malaysia and other countries as well as will continue to be sustainable even after the recovery of the COVID-19 pandemic due to the constant demand in the medical industry as well as the prevailing public awareness on the need for self-protection and hygienic practices."
The group noted out that on Aug 25, its wholly-owned subsidiary Hong Seng Gloves Sdn Bhd had entered into an agreement for the turnkey commissioning of a nitrile butadiene rubber (NBR) double former glove dipping production plant with Howellcare Industries Sdn Bhd for a contract price of RM59.4 million.
It involves the supply and commissioning of six units of NBR double former glove dipping production lines with utilities support system.
Under the deal, Howellcare will also provide services such as setting up and providing training to Hong Seng Gloves’ new operation team to run and manage the day-to-day operation of the Glove production plant on behalf of Hong Seng Gloves and undertaking all marketing and sale of the NBR gloves for Hong Seng Gloves for the initial stage.
Hong Seng added that the expected production capacity and output for each of the NBR double former glove dipping production line is 241,920,000 pieces per annum.
Luster was the second most actively traded stock today with a trading volume of 536.37 million shares. It was the fourth top percentage gainer, rising by 28.57% or five sen to 22.5 sen, valuing the group at RM542.42 million.
Hong Seng, meanwhile, closed unchanged at RM1.03 with a market capitalisation of RM533.20 million.
http://www.theedgemarkets.com/article/luster-hang-seng-latest-jump-rubber-glove-bandwagon
