IT is certainly not that the future for the glove sector is one of gloom and doom amid shrinking average selling prices (ASP) and overcrowded plying field yet Rubberex Corp (M) Bhd owner and sole largest shareholder Datuk Eddie Ong Choo Meng has already found a buffer for the group’s core glove business.
With a solid balance sheet and substantial cash reserves, he expects the glove maker’s timed diversification into property investment via its Empire City Mall venture will provide the group with an alternative income stream “as we look to capitalise on the country’s progressive revitalisation and the reopening of other economies globally.”
“This investment is also in line with the group’s long-term strategy of delivering sustainable growth and returns to our shareholders,” he pointed out as he re-affirms his support and commitment to the group’s core glove business.
Well, it is not that the property sector which has been in the doldrums for a long while now – and still remains soft – will recover overnight with the re-opening of the Malaysian economy/borders, Ong’s action spell boldness in that he does not intend to lump all his bets on one horse.
A glance at Rubberex’s share price speaks volume of his foresight. In tandem with the fate of its Big Four peers, Rubberex’s share price has been on a steep slide with the stock having closed 44 sen yesterday (Feb 22) or 71.7% lower than its 52-week high of RM1.56.
At the pinnacle of the “glove-rush” days, Rubberex saw its share price peaked to as high as RM8.26 in the run-up to its two-for-one bonus issue exercise on Oct 21, 2020.
Ong’s foresight to diversify away from the glove business is further fortified by the fact that Rubberex’s earnings for 4Q FY2021 ended Dec 31, 2021 of RM9.1 mil marked a 63.9% decline from RM25.2 mil in the preceding quarter.
This is inevitable due to lower sales volume, continual easing of ASP, lower capacity utilisation as well as slower incoming orders.
While the enlarged glove capacities contributed by existing and new entrants in the market have also caused ASPs to slide – most notably in recent months – the group remains focused on its nitrile disposable gloves division, according to group managing director Khoo Chin Leng.
“Reinforced by higher safety and health standards globally, the management expects glove demand to pick up and stabilize as we advance towards the endemic phase of COVID-19,” he added.
On the bigger picture, however, Rubberex closed its FY2021 with a record RM185.6 mil in net profits, a jump of RM54.4 mil or 41.5% from RM131.2 mil a year ago. Revenue also reached a historic high of RM511.0 mil, surpassing the previous year’s contribution of RM415.1 mil. – Feb 23, 2022
Main photo credit: The Edge Markets
