This article first appeared in The Edge Malaysia Weekly on May 16, 2022 - May 22, 2022
OVER the past couple of months, the market has been rife with speculation that property developer Mah Sing Group Bhd plans to hive off its rubber glove business, after venturing into the segment only 19 months ago under the Mah Sing Healthcare Sdn Bhd banner.
With most countries now treating the Covid-19 pandemic as near-endemic, if not endemic, demand for rubber gloves has decelerated sharply. The average selling prices (ASPs) of rubber gloves have also normalised as reflected in the much more subdued earnings of rubber glove companies compared to the super profits they were raking in at the peak of the pandemic, when Mah Sing and several other companies jumped on the bandwagon.
In an emailed response to The Edge to a question on whether there are indeed plans to sell its new business venture, a company spokesperson says: “Mah Sing’s core focus remains on our property business, which makes up 92% of the group’s total assets. We have a strong pipeline of 21 projects to support 2022 sales growth, and we also constantly search for new land that can fit our business model.
“The glove manufacturing business is merely 3% of the group’s total assets and aims to strengthen the group’s non-core manufacturing segment. Commissioning of all 12 production lines at Mah Sing Healthcare has been completed, and we have successfully obtained certificates from the governing bodies that regulate the sale and distribution of medical devices in major glove-importing countries and regions.
“This includes 510K from the US Food and Drug Administration (FDA), updated to include nitrile gloves tested for use with chemotherapy drugs, Health Canada Licence for nitrile powder-free examination gloves; UK Medicines and Healthcare products Regulatory Agency; and European Union and European Economic Area (EEA) Medical Device Regulation for medical-grade examination gloves and EU type-examination certificate,” the spokesperson says.
Mah Sing Healthcare fully commissioned its 12 glove manufacturing production lines in May 2021, and produced 160 million gloves last year. Its capacity is much larger, however, as it can produce 38,000 gloves a line an hour, or 3.68 billion gloves a year. If the facility is up for sale, how much would Mah Sing want for it, given that news reports peg its investment at RM150 million for the first phase? The second phase, which involves a doubling of its production capacity to 7.4 billion rubber gloves a year, has yet to be undertaken.
A check on CTOS shows that as at end-December 2020, Mah Sing Healthcare had total assets of RM73.49 million and total liabilities of RM72.18 million.
“Talk of Mah Sing selling its rubber glove business has been going on even as soon as they started operations — the talk then was that Top Glove (Corp Bhd) would buy it over, as Mah Sing’s facility is located close to Top Glove’s in Klang,” the source says.
Top Glove’s Factory 31 occupies an 8½-acre plot in Kawasan Perindustrian Sungai Puloh in Klang, Selangor, just a few doors away from Mah Sing’s facility.
Replying to a request for a comment via WhatsApp on whether his company is eyeing Mah Sing’s facility, Tan Sri Lim Wee Chai, executive chairman and 35.89% shareholder of Top Glove, says: “Good health and good day. No comment. Thank you.”
In early April this year, the Malaysia Rubber Glove Manufacturers Association (MARGMA) indicated that on the back of slower buying patterns, ASPs for rubber gloves would head towards a more normalised level in the first half of the year, but hover higher than pre-pandemic levels in 2019 of US$21 to US$23 for every 1,000 pieces.
MARGMA pegged ASPs at 10% to 15% higher than pre-pandemic levels in the long run, owing to an increase in the costs of raw materials, social compliance and labour.
The Mah Sing spokesperson points out that MARGMA had projected that global glove demand would stay healthy, with an estimated 12%-to-15% annual growth post-pandemic (versus pre-pandemic levels of 8% to 10% a year). “Aside from that, industry players also expect the ASP to bottom soon, with some expecting it to be higher in 2H2022.”
In a report on rubber gloves early last month, CGS CIMB said: “The export value of rubber gloves experienced a sharp increase in 2020 (RM35.3 billion) and 2021 (RM54.8 billion), owing to the Covid-19 pandemic. MARGMA expects the export value growth in 2022F to drop substantially as the pandemic becomes endemic, but the export value is still expected to be higher than that of 2019. Also, the rubber glove export value from Malaysia is expected to grow steadily at 10% year on year from 2022 to 2028.”
In a nutshell, demand for rubber gloves, which had been nudged up by the pandemic, is now easing as vaccination numbers increase and with the pandemic seemingly under control. However, demand for the gloves is still relatively strong.
Mah Sing closed last Friday at 67.5 sen, translating into a market capitalisation of RM1.64 billion.
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