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Vizione Holdings Bhd
has become the latest to join the race on the glove making train, after recently announcing a proposed deal to pay RM5 thousand in cash for a 51% majority stake in glove maker SSN Medical Products Sdn Bhd .
The proposed deal also took into account SSN’s net liability of 6.8 million yuan and net loss of 1.4 million yuan for the eight months ended August 31, according to the draft of the management accounts of the company.
Given the current high valuations for glove companies, SSN’s less than stellar financial results are likely to have influenced Vizione’s proposed RM5mil stake purchase. Vizione Managing Director Datuk Ng Aun Hooi said the group also expects to inject RM30,000 in capital expenditures (capex) to triple SSN’s production capacity to 1.5 billion gloves per year, over the next two years.
On September 2, Vizione told Bursa Malaysia that it had entered into a Heads of State Agreement (HoA) regarding the SSN agreement, which is conditional and subject to financial and legal due diligence. The shareholders of Vizione and SSN have 90 days from the date of the HoA to sign the final agreements.
Still, Ng hopes to close the deal soon and expects it to increase profits immediately, given the current rise in sale prices for medical gloves amid the pandemic.
“It is the first time we have entered an industry that is not related to construction. We are convinced that the return on investment (ROI) will be fast, “he told StarBiz in a recent interview.
He also highlighted that, unlike some startup glove companies planning to start from scratch, Vizione is buying an established business.
Ng reiterated that this was also a continuation of the integrated construction engineering group’s diversification journey to invest in businesses that can provide a steady stream of recurring income.
Also in attendance were Vizione CEO Chan Chee Wing and SSN Medical Products CEO Clinton Ang Teck Leong, who has an 82% stake in SSN.
SSN’s operations are in Seri Kembangan, Selangor, and the 21-year-old company manufactures and sells condoms and latex medical gloves.
It exports around 80% of its products and most of it goes to the United States, China, Germany and other European countries.
It has nine manufacturing lines with a total capacity of more than 500 million gloves and 150 million condoms per year.
“We currently have space to add 30% more production capacity, from two new manufacturing lines. This can bring our total production capacity to 750 to 800 million gloves per year. The new production can go into operation in June 2021, ”says Ang.
The next phase of production expansion, on an adjacent factory site, is to establish four more manufacturing lines that can add another 750 million gloves each year.
“We partner with Vizione because we don’t want to be left out of the opportunities created by the pandemic. We need the capex, so we can expand faster, ”Ang said.
He pointed out that there were quite a few obstacles to starting a new glove manufacturing company.
“The big four glove companies are also expanding production. Glove lines are made to order or custom. There are maybe eight manufacturers of glove lines in Malaysia, all of them are fully stretched. New glove manufacturers must also take into account aspects such as customer acquisition, raw materials, the supply chain, etc. “, said.
Ang felt that the demand for medical gloves would not decrease, at least until 2021. “Even if an effective vaccine is announced, it will still not be available. The demand for gloves has always been healthy, growing between 13% and 15% annually.
> Order book and renewable energy projects
In Vizione’s construction order book, Ng said the balance is more than RM2bil, which will last the group until 2024.
“As for our bid book in hand, we have a little less than RM2 billion,” he said.
He says the group is also in advanced stages of bidding for an engineering, procurement, construction and commissioning (EPCC) contract for a 50MW hydroelectric plant in Terengganu.
“We also recently closed three tenders in September for floating solar parks and hydroelectric plants with a capacity of 40MW. We will focus on the renewable energy (RE) sector for the next several years, to obtain recurring revenues, ”he said.
Vizione made its first foray into the renewable energy sector in August, after paying RM150,085 for a 75% stake in Tunjang Tenaga Sdn Bhd (TTSB), which owns 80% of SDF Hydro Sdn Bhd (SDF). The remaining 20% stake is held by Menteri Besar Kedah Inc.
On December 24, 2019, SDF received approval from the Sustainable Energy Development Authority (SEDA) to operate a small 9.6 megawatt (MW) hydroelectric plant at Pedu Dam, Kedah for 21 years.
Vizione has a RM90mil contract with SDF for the design, construction, testing and commissioning of the hydroelectric plant, to be completed in August 2024.
Vizione will operate the hydroelectric plant for 21 years, with a total revenue estimated at RM245 million.
Ng had pointed out that there are many opportunities in the renewable energy segment, as Malaysia aims to increase renewable energy in its power generation mix to 20% by 2025 from 8% in 2019, according to the Energy Commission.
“Our goal is to secure clean energy projects worth up to RM1bil over the next two to three years, either on our own or in joint ventures,” he had stated.
As for the group’s property development unit, Ng said that due to the Covid-19 pandemic, it had decided to delay the launch of a planned project until 2021.
“We were supposed to launch a new mixed property development in Selayang, Kuala Lumpur, earlier this year, with affordable housing as the main component. However, now there are too many unknowns. “
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