Malaysia’s top glove-makers tap overseas listing to diversify investor base

Malaysia’s top glove-makers are chasing overseas listing plans to raise more capital and to diversify their investor base even as they continue to see a demand surge driven by the coronavirus pandemic.

Supermax Corp Bhd, Malaysia’s third-largest rubber glove maker by market value, has proposed to list on the Singapore Exchange to expand and diversify its shareholder base and to raise funds, the company said in its October 27 filing.

Shareholders of Supermax, which has been listed in the Malaysian bourse since 2000, include founder Thai Kim Sim (21.98%) and his wife Tan Bee Geok (16.27%), insurance player AIA Bhd (1.59%) and Norway’s Norges Bank (1.64%).

Top Glove Corp Bhd, the world’s largest glove producer, is also said to be exploring an option to raise over $1 billion from a listing in Hong Kong, Bloomberg reported. Top Glove has a secondary listing on Singapore Exchange.

The proposed HKEX listing will enable Top Glove to be present in a larger, more active and liquid stock exchange, enlarge and diversify its investor base, and also provide an alternate and larger fundraising platform to support the company’s future growth strategy, Top Glove said in a filing on October 21.

Top Glove’s shareholders include founder and chairman Lim Wee Chai (26.8%), Employees Provident Fund Board (6.5%), Malaysia’s KWAP (3.8%), US-based The Vanguard Group, among others.

Dual listings allow companies to have more exposure to a larger pool of investors, according to market analysts.

“Listing in one more exchange does help companies raise their profile. It allows companies to have more options, when they need to raise funds in the future,” MIDF Research analyst Ng Bei Shan told DealStreetAsia.

Apart from dual listings, glove-makers in the region have also been active in chasing IPO dreams. Malaysian glovemaker Harps Holdings Sdn is reportedly weighing an initial public offering in Kuala Lumpur to raise about $500 million, Bloomberg reported in August.

And, Thailand’s Sri Trang Gloves made a stellar debut in July after raising $470 million in its IPO. Sri Trang is the world’s third-largest rubber glove producer after Top Glove and Hartalega. Sri Trang has gained more than 47% since its listing on July 2, outperforming Thailand’s SET index which fell more than 11% during the same period.

Overseas listing likely to aid expansion

For glove companies that are expanding beyond Malaysia’s shore, it is reasonable and natural to look for additional listings elsewhere which provides them additional avenues to raise funds in the future, said Ng.

Supermax is targeting to build a capacity of about 15 billion pieces of gloves in the US market, 220 million pieces capacity in the UK besides commissioning its Canadian face mask production facility.

Cash-rich Supermax has earmarked RM1.3 billion ($314 million) for five new plants in Malaysia and another $550 million for plants in the US, she said. Supermax has plans to build a plant in the UK estimated to cost 50 million pound sterling.

“We believe that its expansion plans can be supported by its strong balance sheet as net cash stood at RM2.1 billion ($507 million) as of end September,” Ng wrote in a note dated October 28.

“When a global pandemic hits, many countries that export medical protective gear tend to prioritise domestic demand to ensure sufficient supply. Some countries also realised they cannot be too dependent on other countries to source for essential medical items like gloves, PPE and face masks,” she said.

With the COVID-19 impact, projected global demand for 2020 is 330 billion gloves, an increase of 20 per cent year-on-year versus the usual 8-10 per cent, Hong Leong Investment Bank analyst Farah Diyana Kamaludin wrote in a sectoral report dated Oct 8.  “[Even]Post Covid-19, we opine the normalised global glove demand growth would be at circa 13-15 per cent.”

 

Sources: Top Glove, Malaysia Rubber Glove Manufacturers Association, Hong Leong Investment Bank Research

According to CGS-CIMB analyst Walter Aw, potential funds raised by Top Glove will likely be used for expansion purposes,.

“In our view, the funds raised from the potential primary Hong Kong listing will mainly be utilised for future capacity expansion plans or potential merger and acquisition exercises,” CGS-CIMB analyst Walter Aw wrote in a note dated Oct 14.

Top Glove has earmarked up to RM10 billion for capital expenditure from 2021 to 2026. This includes plans to raise its total glove production capacity by another 100 billion pieces annually from 85.5 billion pieces.

Glove counters buzzing

Glove counters have had a good run on the local bourse driven by the surge in demand boosting sales and margins for these companies.

If the proposed SGX listing plan goes through, Supermax will be joining Top Glove that has a secondary listing on SGX and Riverstone Holdings Ltd, another glove maker listed on the Singapore exchange. Riverstone’s share price jumped over 293 per cent to close at S$3.70 on November 4, outperforming the Straits Times Index which fell more than 29 per cent in the same period.

Last month, Supermax posted an almost 32 times jump in its quarterly net profit of RM789.52 million ($191.12 million), from RM24.75 million ($5.99 million) a year ago,  due to higher average selling prices and robust demand. Revenue for its first quarter ended Sept 30 surged 265.6% to RM1.35 billion ($326.8 million), from RM369.94 million ($89.56 million) a year ago.

To date, Supermax’s share price has jumped more than 1180 per cent to close at RM8.84 on November 4, with a market capitalisation of RM 24.05 billion ($5.82 billion).

Meanwhile, Top Glove recorded a profit of RM1.29 billion ($312.29 million) in the fourth quarter recorded, nearly 18 times higher compared with RM74.17 million ($17.96 million) posted in the corresponding quarter last year. Revenue for the quarter surged 161% to RM3.11 billion ($752.88 million), from RM1.19 billion ($288.08 million) in 4QFY19.

“Profit margins in some glove companies have grown from single-digit to 40% to 50% due to the pandemic. Glove companies are raking in supernormal profits in such a short period of time. They should take advantage of such a situation when results are at its best and there is high interest on glove counters,” another analyst observed.

Top Glove and Supermax did not respond to DealStreetAsia’s query for comments on this story.

Top Glove has surged more than 400 per cent on the local bourse. It has a market capitalisation of RM66.37 billion and has emerged as the second most valuable company on the local bourse, after the country’s largest bank, Malayan Banking Bhd.

In comparison, the benchmark FBM KLCI fell 8.6 per cent since the beginning of the year.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.