As­pion profit boost for Top Glove

Ac­qui­si­tion likely to ac­cel­er­ate its ex­pan­sion into lu­cra­tive mar­kets

The Star Malaysia - StarBiz - - Front Page - By S. PUSPADEVI puspa@thes­tar.com.my

SHAH ALAM: Top Glove Corp Bhd says the plan to buy sur­gi­cal glove maker As­pion Sdn Bhd for at least RM1.3bil will boost the group’s prof­its by a fifth in the fi­nan­cial year end­ing Aug 31, 2018 (FY18) and ac­cel­er­ate the group’s ex­pan­sion into the highly lu­cra­tive seg­ment of the mar­ket.

As it is, As­pion com­mands a healthy 30% gross profit mar­gin on its business, while Top Glove’s own smaller sur­gi­cal glove unit gen­er­ates about 20% gross profit from sales.

“We ex­pect to sign the sale and pur­chase agree­ment next month and the com­ple­tion of the ac­qui­si­tion is tar­geted for Fe­bru­ary 2018,” Top Glove’s founder and ex­ec­u­tive chair­man Tan Sri Lim Wee Chai said.

“As­pion is ex­pected to con­trib­ute around 20% of prof­its and rev­enue to Top Glove,” he told StarBiz yes­ter­day.

As­pion is cur­rently the sec­ond-largest pro­ducer of sur­gi­cal gloves in the world, with an an­nual pro­duc­tion of 1.4 bil­lion pieces or an 18% mar­ket share.

Top Glove has a 12% global mar­ket share in this seg­ment, pro­duc­ing 665 mil­lion pieces a year. The sur­gi­cal glove seg­ment, prior to the ac­qui­si­tion, con­trib­uted about 5% of Top Glove’s rev­enue.

“The ac­qui­si­tion will make Top Glove the largest ex­porter of sur­gi­cal gloves in Malaysia, with a pro­duc­tion ca­pac­ity of 1.8 bil­lion pieces in FY18 and be­come the world’s largest sur­gi­cal glove man­u­fac­turer,” Lim said.

Top Glove made a net profit of RM332mil for FY17 ended Aug 31, the com­pany said last month.

The mar­ket is pro­ject­ing the com­pany to make around RM400mil in FY18, based on con­sen­sus es­ti­mates af­ter the deal was an­nounced last Fri­day.

Top Glove had ear­lier said it had en­tered into a term sheet with Ad­venta Cap­i­tal Pte Ltd to buy As­pion in a deal worth be­tween RM1.3bil and RM1.4bil.

As­pion has pro­vided a profit af­ter tax guar­an­tee of RM80mil for the year end­ing Oct 31, 2018.

As­pion is wholly owned by Ad­venta Cap­i­tal Pte Ltd, whose ma­jor share­hold­ers are Low

Chin Guan and Sin­ga­pore-based pri­vate eq­uity fund South­ern Cap­i­tal Group Pte Ltd.

Lim said pro­duc­tion at As­pion is pro­jected to grow to 1.6 bil­lion pieces by 2019 due to the on­go­ing ca­pac­ity ex­pan­sion at its Kulim plant in Kedah.

“Low, the ma­jor share­holder of As­pion, will con­tinue to man­age As­pion’s sur­gi­cal glove business seg­ment and we in­tend to of­fer him a key po­si­tion in the group,” he said.

As­pion’s Kulim plant houses the com­pany’s most re­cent tech­nol­ogy and re­search and de­vel­op­ment cen­tre. It also has man­u­fac­tur­ing fa­cil­i­ties in Klu­ang, Jo­hor and Kota Bahru, Ke­lan­tan, cater­ing mainly for ex­am­i­na­tion gloves.

As­pion owns cut­ting-edge tech­nol­ogy, namely, its Fi­nes­sis sur­gi­cal glove which is known to be the only tech­nol­ogy ca­pa­ble of re­duc­ing the num­ber of viruses (such as HIV) trans­ferred in cases of per­cu­ta­neous in­jury.

The news of the pro­posed ac­qui­si­tion of As­pion is not sur­pris­ing, as the mar­ket has been an­tic­i­pat­ing it since Lim men­tioned a month ago that the com­pany would be an­nounc­ing a ma­jor ac­qui­si­tion that could pos­si­bly cost more than RM1­bil.

And he has made it clear that Top Glove has been on the look­out for merg­ers and ac­qui­si­tions (M&As) for the last sev­eral years.

“We have been ex­plor­ing non-listed glove play­ers for a long time as part of our M&A ex­pan­sion plans.

“How­ever, some (com­pa­nies) are not ready to do it.

“As for As­pion, most of our dis­cus­sions were ar­rived at two months ago and it is a prof­itable com­pany with pres­ence in west­ern Europe, the United States and Ja­pan,” Lim noted, adding that this com­ple­mented Top Glove’s business, as it was present mostly in the emerg­ing mar­kets.

Top Glove shares closed up 10 sen or 1.48% to RM6.85 yes­ter­day, with 5.91 mil­lion shares be­ing traded. At this price, the com­pany is worth RM8.6bil.

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