WITH the construction industry being in the doldrums, George Kent (M) Bhd is seeking solace by joining the fray of glove ‘converts’ alongside its sister company Johan Holdings Bhd (at a 40:60 equity split).
Yesterday, George Kent announced that it has obtained the right to undertake the design and construction of a glove manufacturing plant at the Lumut Industrial Park, Perak by Dynacare, a subsidiary of Johan Holdings.
The job which is worth RM624.1 mil will bolster George Kent’s construction order book at a time when construction contracts are scarce, according to the company
“The contract is timely and will immediately contribute to the group’s bottom line over the next two years,” George Kent pointed out in a media release.
“The group’s expertise, experience and track record of delivering construction projects on time and within budget offer the assurance that the plant will be completed in good order and on schedule.”
Moreover, the global contract will also create a new growth area for George Kent’s construction arm which has been involved in hospital and water infrastructure construction as well as rail systems works.
“The group will work with experienced glove-dipping-line technology providers to deliver high-capacity, fully automated production lines,” projected George Kent.
“This business will be an area of growth for the company as existing and new glove manufacturing players expand their production capacity in the coming years.”
As for its 40% stake in the glove business, George Kent said this will provide the group with recurring income that is not from the contracting business.
This recurring income will contribute substantially to the group’s bottom line for years to come as the glove business is sustainable in both good and crisis times, scalable worldwide, and recession-proof.
Under the entity Dynacare Sdn Bhd, a subsidiary of Johan Holdings, both partners are anticipating a revenue of RM2.4 bil on the basis of 42 lines operating at full capacity for a 12-month period based on an average selling price of US$5.50 per 100 pieces of surgical gloves.
Commercial production of the first production line is expected to commence in August with a total of six production lines to be fully operational by December. The remaining 36 production lines will be commissioned and operationalised in stages between 2022 and mid-2023.
“The board anticipates that, barring any unforeseen circumstances, the group’s new business activities in the glove business may contribute 25% or more of the net profits of the group and/or result in a diversion of more than 25% of the net assets of the Group towards the aforesaid new business activities moving forward,” added George Kent.
At the close of today’s trading, George Kent was down 1.5 sen or 1.85% at 79.5 sen with 5.4 million shares traded, thus valuing the company at RM448 mil. – March 30, 2021