AT (0072) AT SYSTEMATIZATION BHD – The winning horse after the race?
The COVID-19 pandemic has been ongoing for almost the entire year of 2020, resulting in a huge rally in all gloves and healthcare related stocks while all the other sectors are struggling to maintain business.
Mass vaccination is said to be the way of controlling the spread of the coronavirus. Pharmaceutical companies are working through the clock to develop an effective vaccine but has proved to be a difficult task due to the evolving nature of the coronavirus. Investors are fearful that the demand for medical gloves will drop immediately upon the release of vaccine. But on the contrary, the need for medical-grade gloves will remain for at least another year after the release of vaccine because medical staffs will need to be using gloves as they administer vaccines for hygienic purposes. Most governments of the world have increased their healthcare budget and implemented new hygiene practices.
Following the unprecedented performance by Topglove, Supermax, Hartalega and Kossan, many businesses are taking this golden opportunity to dabble into glove manufacturing business. Mah Sing, Luster Industries and AT Systematization are some of the notable companies that have recently made announcements of their interest in this industry.
Mah Sing (KLSE 8583)
Mahsing, a huge player in the property and plastic industries is one of the company that jumped onto the bandwagon of glove making recently. Hence their share price has gone up from 0.75 cents to a peak of RM1.47 following their announcement. With their years of experience with plastic industries, their venture into glove manufacturing should not be too difficult for them. In October, Managing Director and Founder, Tan Sri Leong Hoy Kum announced that they have started piling and ground works in their new factory in Kapar. Their first of six production lines should be ready in April 2021 at the earliest, with the maximum production of 3.68 billion gloves per annum in their plan of investing 150 million ringgit. This projection is rather optimistic and should be achievable provided if nothing goes wrong. Their main business of properties has seen better days however, future prospect for the group should be carefully considered.
Luster Industries (KLSE 5068)
Luster funded 50 million ringgit in a joint venture with Fortune Tac Sdn Bhd to start Glovemaster Sdn Bhd with 56% stake aiming to produce 2 billion gloves per annum at maximum capacity. They are currently identifying a suitable location for the manufacturing plant. The expected delivery time is in the third quarter of 2021. Following the announcement, the share price has also been rising from 14 cents to a peak of 29.5 cents in recent weeks. There will be a whole pile of work needed to be done by Luster prior to us as investors to be able to witness the first pair of gloves.
AT Systematization (KLSE 0072)
AT Systematization (KLSE 0072) has gathered loads of investor’s attention in the past trading week with total volume traded exceeding 10 billion shares. The share price has rose from 13 cents from closing of the previous Friday (6th Nov) to 25.5 cents this week (13th Nov), an increase of 96.2%. The Executive Director, Mr Mak Siew Wai has extended invitation to some notable investors for a visit at their glove manufacturing facilities in Chemor, Perak on Friday (13/11). As an engineer by profession, I was impressed with their construction progress in such a short time of just over 4 months. This is an example of good management. The first production line will be commissioned and running by 24th November. Their entire plant is bought by cash and constructed without any borrowings, with a total investment of 120 million ringgit. Hence with the forecast of 2.6 billion gloves produced by June 2021, their profit would be estimated at 218mil per month.
Dipping Plant Shipment of Raw Material
Walk-in Interview Interview in Progress
As the pandemic continues, investors must accept the fact that more companies will announce their intention to venture into glove manufacturing business. However, starting from scratch will take a long time. As most investors would have known, Mr Koon Yew Yin has publicly announced of his involvement in AT earlier with a target price of 70cents. Many would ask the reasons of him buying into AT while it doesn’t comply with his golden rule of stock selection. Let us not forget one thing however, profit growth prospect is one of his main factors of stock selection as well. In addition, it complied with his personal vision of increasing employment rates in Malaysia. Surely, with AT’s exceptional progress in this new venture and with their production starting in a couple of weeks, their effort is applauded and their future is definitely worth our attention as investors.
Could AT be the winning horse after the race? Only time can tell.