Vizione joins the ‘glove rush’ with RM30mil capital expenditure

Vizione's Ng Aun Hooi: The group expects to inject RM300mil in capex to triple SSN's production capacity.

Vizione Holdings Bhd has become the latest to join the rush onto the glovemaking bandwagon, after it recently announced a proposed deal to pay RM5mil cash for a 51% majority stake in glovemaker SSN Medical Products Sdn Bhd.

The proposed deal also took into account SSN’s RM6.8mil net liability and RM1.4mil net loss for the eight months ended Aug 31, as per the company’s draft management accounts.

Given the current high valuations for glove companies, SSN’s less-than-stellar financial results are likely to have weighed on Vizione’s proposed RM5mil stake buy. Vizione managing director Datuk Ng Aun Hooi said the group also expects to inject RM30mil in capital expenditure (capex) to triple SSN’s production capacity to 1.5 billion gloves per year, over the next two years.

On Sept 2, Vizione told Bursa Malaysia it had entered into a Heads of Agreement (HoA) regarding the SSN deal, which is conditional and subject to financial and legal due diligence. Vizione and SSN’s shareholders have 90 days from the date of the HoA to sign definitive agreements.

Still, Ng is looking forward to sealing the deal soon, and expects it to be earnings-accretive immediately, given the current increased selling prices for medical gloves amid the pandemic.

“This is the first time we are venturing into an industry that is not related to construction. We are convinced the return on investment (ROI) will be fast, ” he told StarBiz in a recent interview.

He also highlighted that unlike some new glove-making ventures planning to start from scratch, Vizione is buying into 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 present were Vizione executive director Chan Chee Wing and SSN Medical Products executive director 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 latex medical gloves and condoms.

It exports around 80% of its products with the bulk going to the United States, China, Germany and other European countries.

It has nine manufacturing lines with a total capacity of over 500 million gloves and 150 million condoms a 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 annum. New production can come on-stream by June 2021, ” says Ang.

The next phase of production expansion, on an adjacent factory land, consists of setting up four more manufacturing lines which can add another 750 million gloves every year.

“We are partnering Vizione because we do not want to be left out of the opportunities created by the pandemic. We need the capex, so we can expand faster, ” said Ang.

He pointed out there were quite a number of hurdles in starting a new glove-making venture.

“The big four glove companies are also expanding production. Glove lines are made to order, or customised. There are perhaps eight glove line manufacturers in Malaysia – everybody is fully stretched. The new glovemakers also need to look at things like acquiring customers, raw materials, the supply chain, etc, ” he said.

Ang felt the demand for medical gloves would not drop, at least through 2021. “Even if an effective vaccine is announced, it will not be readily available yet. Demand for gloves has always been healthy, growing at 13% to 15% per annum.

> Order book and renewable energy ventures

On Vizione’s construction order book, Ng said the balance stands at over RM2bil, which will last the group until 2024.

“As for our tender book in hand, we have slightly less than RM2 billion, ” he said.

He says the group is also in advanced stages of tendering for an engineering, procurement, construction and commissioning (EPCC) contract for a 50MW hydropower plant in Terengganu.

“We also recently closed three tenders in September for floating solar farms and hydropower plants with capacity of 40MW. We will be focusing on the renewable energy (RE) sector for the the next few years, for recurring income, ” he said.

Vizione had made its first foray into the RE sector in August, after paying RM150,085 for a 75% stake in Tunjang Tenaga Sdn Bhd (TTSB) which owns 80% in SDF Hydro Sdn Bhd (SDF). The other 20% stake is held by the Menteri Besar Kedah Inc.

SDF had on Dec 24,2019 received feed-in approval from the Sustainable Energy Development Authority (SEDA) to operate a small 9.6 megawatt (MW) hydropower plant at Pedu Dam, Kedah for 21 years.

Vizione has a RM90mil contract with SDF for the design, construction, testing, and commissioning of the hydropower plant, which is due to be completed in August 2024.

Vizione will operate the hydropower plant for 21 years, with total revenue estimated at RM245 million.

Ng had pointed out that there are many opportunities in the RE segment as Malaysia aims to increase the RE in its power generation mix to 20% by 2025 from 8% in 2019, according to the Energy Commission.

“We target to secure clean energy projects worth up to RM1bil over the next two to three years, be it 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 a planned project launch to 2021.

“We were supposed to launch a new mixed property development in Selayang, Kuala Lumpur earlier this year, with affordable homes as the main component. However, there are too many unknowns now.”