Hartalega’s latest land acquisition a solid indication of commitment on longer term expansion and growth

SHORT-term interbank rates ended stable yesterday on Bank Negara Malaysia’s (BNM) operations to absorb surplus liquidity from the financial system.

The surplus in the conventional system decreased to RM61.22 billion from RM68.19 billion in the morning, while in the Islamic system, it fell to RM26.76 billion from RM28.69 billion.

Earlier on, the central bank conducted two conventional money market tenders, one Qard tender and two reverse repo tenders.

At 4pm, BNM called for a RM61.2 billion conventional money market tender and a RM26.80 billion Murabahah money market tender, both for one-day money.

It revised the conventional overnight tender to RM61.2 billion from RM60.2 billion.

The central bank also revised the Murabahah overnight tender to RM26.8 billion from RM25.1 billion.

The average Islamic overnight interest rate stood at 2.48 per cent, while the one-, two- and three-week rates were pegged at 2.54 per cent, 2.58 per cent and 2.63 per cent, respectively.

KUCHING: Hartalega Holdings Bhd’s ( Hartalega) latest land acquisition is a solid indication of the group’s commitment on its longer term expansion and growth, analysts opine.

In a filing on Bursa Malaysia, Hartalega’s board of directors announced last week that wholly-owned subsidiary Hartalega NGC Sdn Bhd had on March 25, 2020 entered into a Sale and Purchase Agreement with Bonus Essential Sdn Bhd for the acquisition of land for a total cash consideration of RM263.1 million for industrial land.

The filing also revealed that the site is located strategically near to existing NGC Sepang, close proximity to the West Coast Expressway interchange in Banting, surrounded by nearby rapid industrial and housing development as well as the availability of local workforce.

“This land is for the group’s next phase of expansion. Hartalega is planning to commission a total of 82 lines with total capacity of approximately 32 billion pieces of gloves per annum at this facility,” AllianceDBS Research Sdn Bhd (AllianceDBS Research) said.

“Construction is targeted to commence from 2021 and complete in 2029. Capital expenditure (capex) for this new plant is estimated at RM3 billion.

“We are encouraged by the acquisition - a solid indication of the group’s commitment on its longer term expansion and growth.”

The research firm noted that this new expansion will bring Hartalega’s total capacity to 76 billion pieces of gloves per annum by 2029, up 74 per cent from 43 billion pieces of gloves per annum once Plant 7 for NGC1 is fully commissioned by 2021.

“This land acquisition will be funded by internally generated funds. Based on our operating cash flow forecasts, we believe Hartalega should have no issue funding the acquisition.”

THE Malaysian rubber market snapped previous losses to close on a positive note yesterday, as market operators reacted optimistically to China’s better-than-expected manufacturing data for March 2020.

A dealer said the gains were also supported by a recovery in both benchmark crude oil prices and regional rubber futures markets.

“Nevertheless, the gain was capped by a stronger ringgit against the US dollar coupled with uncertainties over the prolonged Covid-19 pandemic which weighed on investor confidence,” he said.

According to the National Bureau of Statistics, China, China’s official Purchasing Managers’ Index rose to 52.0 in March from a collapse to a record low of 35.7 in February. The Tokyo Commodity Exchange rubber contract for September delivery rose on Tuesday as investors looked for bargains after prices hit 11-year lows the previous day on persistent fears over the Covid-19 pandemic.

“However, the rapid global spread of Covid-19 is expected to keep businesses and the overall economy under heavy pressure as foreign demand slumps,” he said.

Meanwhile, as at 5pm, Brent crude futures, the global oil price benchmark, were traded 2.65 per cent higher at USS$27.12 per barrel. At 5pm, the Malaysian Rubber Board’s (MRB) reference physical price for tyre-grade SMR 20 rose half-a-sen to 453.5 sen per kg and latex-in-bulk improved half-a-sen to 410.00 sen per kg.