WHILE investors are generally positive on Mah Sing Group Bhd’s proposed diversification into the manufacturing and trading of gloves and related healthcare products, critics have expressed scepticism over the company’s ambitious target of commencing its first two manufacturing lines in April 2021.
To enlighten the critics, TA Securities Research has endeavoured to probe Mah Sing’s ability to fast-track its diversification from its core real estate sector to glove production.
To begin with, the manufacturing lines will be installed in a ready-built factory in Kapar, Klang, thus cutting down on the overall construction/preparation time by about six months to accommodate 12 units of new high speed glove dipping equipment at its glove manufacturing plant.
“To speed up the progress, we also understand that fabrication works for the new machineries has already started at the equipment supplier’s factory,” revealed analyst Thiam Chiann Wen in a company update.
“Given the additional pilling works are nearing completion, we gather that the initial lines are on track for installation on site this month.”
Lastly, the management opined that its gloves venture can leverage on the company’s more than 40 years of experience in the plastic manufacturing sector where it can tap on the existing processes from the plastic business such as procurement of raw materials, quality control, research and development, logistics and supply chain planning.
On that note, Thiam said Mah Sing has already secured supply of both Nitrilebutadiene rubber and latex raw materials and should be able to quickly meet the demand of its customers.
“We understand that indicative orders received to date have far exceeded its Phase 1 & 2 capacity totalling 7.35 billion pieces of gloves per annum,” the analyst pointed out.
Moving forward, TA Securities Research is impressed with Mah Sing’s fast turnaround business model as demonstrated in the undertaking of its property projects.
“The group’s rapid speed in planning and marketing new developments has enabled them to officially launch all three new land plots that the group acquired last year within seven to 12 months from the date of acquisition,” justified Thiam.
“As for the new glove manufacturing business, we are impressed by the speedy execution to capitalise on the surge in demand for healthcare products.”
According to TA Securities Research, the first phase of Mah Sing’s glove-making venture (3.68 billion gloves per annum) is on track to begin commissioning in April 2021 and be fully commissioned by September 2021.
“Given the overwhelming demand, the management is also looking to bring forward the development of the second phase which may increase the capacity by another 3.68 billion pieces of gloves annually,” added Thiam.
All-in, TA Securities Research maintained its “buy” rating on Mah Sing with a higher sum-of-parts-based target price of RM1.28 (previously 96 sen) in line with the research house’s average target price-to-earnings ratio for glove players.
At 9.15am, Mah Sing was up 1.5 sen or 1.58% to 96.5 sen with 12.46 million shares traded, this valuing the company at RM2.34 bil. – Nov 4, 2020
