Lim juggling with rubber gloves and real estate

  • Property
  • Saturday, 28 Mar 2020

Market observers point out that while Lim(pic) has made his fortune in the rubber glove industry over the years, it is likely that he is diversifying his risks and also possibly looking at ways to monetise some of the real estate assets parked in Top Glove.

Top Glove Corp Bhd’s founder and chairman Tan Sri Lim Wee Chai’s entry into property developer LBS Bina Group Bhd over the past week is noteworthy.

Market observers believe that this is a strategic move that may become clearer over time.

They point out that while Lim has made his fortune in the rubber glove industry over the years, it is likely that he is diversifying his risks and also possibly looking at ways to monetise some of the real estate assets parked in Top Glove.

But Lim has insisted that the move has nothing to do with Top Glove.

When asked at a conference call about his recent 6.81% substantial stake purchase in LBS, Lim says: “This is a private investment in LBS.

“It is an investment for me and a diversification (of funds) for me as well. Just like anybody else who invests. It has nothing to do with Top Glove as its business is to produce and sell gloves.”

However, some reckon that the move, in the bigger picture, could also be part of Lim’s plan to ensure a steady supply of properties or probably in this case, a small stake in strategic future land banks might come in handy in the distant future if the need arises.

What is of interest here is that Top Glove, of which Lim is the biggest shareholder, has a fair bit of real estate that are parked in the company.

Owning these properties is also not core to its business of producing rubber gloves.

A glance at Top Glove’s latest annual report that was released late last year reveals that the company has a sizable number of properties or landbanks that it owns.

Most of these are freehold land that are in the areas where its factories or offices are located, including in the cities of Klang, Ipoh and Kuala Langat, Selangor.

Some of these properties are landbanks which are empty, while many others are bought for staff accommodation.

With this, it does appear that Lim has quite an appetite for owning properties and this appears to be seen in the company’s property inventory as well.

As Top Glove grew over the years, its assets have naturally also increased in tandem with this growth.

According to its latest balance sheets dated Feb 29; property, plant and equipment which is parked under non-current assets was last valued at RM2.74bil.

This is a growth of almost four fold from RM563.24mil under the property, plant and equipment values ten years ago in 2010.

Interestingly, Top Glove’s balance sheet also has a new category compared to ten years ago where it also buys into investment property and this is valued at some RM163.91mil on Feb 29,2020.

Pertaining to these investment properties, Lim commented in the conference call that it had an “investment team to take care” of these properties.

LBS is a mid-sized property developer with a market capitalisation of RM595.50mil and with net tangible assets (NTA) valued at 89 sen per share.

It was last traded at 38 sen per share, which is at a 42.7% discount to its NTA value.

On the surface it might appear that Lim had taken this opportunity to buy into an undervalued company in the property sector during these dire times, after all the rubber glove industry has held up very well amid the recent stock market panic selldown.

LBS has several landbanks as noted in its 2018 Annual Report that might have been attractive to Lim in the first place.

These include some tracts of leasehold land that are located in Klang and Kuala Langat as they are in the same areas where some of Top Glove’s properties are located.

LBS notes in its annual report that these lands are being developed and held in its books for development in the future.

Other than that, LBS also owns some 59.87% in MGB Bhd which is a construction services company.

MGB last had a market capitalisation of RM230.76mil.

MGB which last year launched its RM40mil precast concrete plant also has the expertise for the industrial building system (IBS) technology.

This IBS technology has been useful for LBS’ core property development operations.

On the surface, Lim’s entry into the smallish property developer LBS may not be obvious at the moment.

However, Lim’s appetite for a property company when every segment of the market appears to be shunning them indeed does raise interesting probabilities or scenarios that could happen in the future.

Much synergy can be achieved by both Top Glove and LBS with Lim’s purchase of such a significant stake in the property developer given Top Glove’s continued need for a property developer or contractor as it continues to expand operations.

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