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Luster enters into JV with Fortune Tac to make, distribute and sell gloves

Luster enters into JV with Fortune Tac to make, distribute and sell gloves

19 Oct 2020

Luster Industries Bhd has entered into a joint venture agreement with Fortune Tac Sdn Bhd to diversify and undertake the business of manufacturing, sales and distribution of gloves, via its joint company Glovmaster Sdn Bhd.

Luster is currently involved in the manufacturing of precision plastic parts and components, property development and construction, as well as the gaming and leisure industry in Cambodia.

“The proposed joint venture allows the group to further expand its manufacturing segment by including the manufacturing of gloves into its existing manufactured products,” it said in a Bursa filing.

Luster will hold 56% of the equity in Glovmaster, while Fortune Tac will hold the remaning 44%. Luster will be responsible for the financing requirements and to oversee the overall operational management and financial aspects of Glovemaster.

Fortune Tac will be responsible for the construction of the factory building and the infrastructures, setting up of and commissioning of production lines, machineries, and plant and equipment, to contribute the business knowhow, technical aspect, skills and technologies of the gloves business; and to manage and execute the manufacturing and production operations of Glovmaster with Luster.

The proposed joint venture is accompanied with the aggregate profit before tax (PBT) guarantee for a period of 2 years provided and undertaken by Fortune Tac to Luster. The gloves business may contribute 25% or more of the net profits of the group moving forward.

“With the aggregate PBT Guarantee and the moratorium shares in place, our group’s investment risk is limited for at least the initial two years of commencement of the gloves business. Further, Luster will also recruit the necessary personnel, who has the experience and skillset required to support Glovmaster,” it said.

In additon, as a security of the PBT, Fortune Tac had agreed to place its entire 44% shareholding in Glovmaster with Luster as moratorium shares, which will only be released to Fortune Tac proportionately with the PBT guarantee achieved.

The gloves business is intended to manufacture nitrile gloves as a start and may venture into other type of gloves in the event there is demand, or when the production capacity allows for additional production of gloves.

At present, both parties have identified a piece of land in Banting as the site for the new manufacturing business.

“The new manufacturing plant is expected to house a total of 7 double former gloves production lines with estimated annual production capacity of 2 billion pieces of nitrile gloves. Subject to approvals, the construction of the gloves manufacturing plant is expected to commence in the first quarter of 2021 and is scheduled for completion within 6 months from the commencement date of construction,” Luster said in its Bursa filing.

Upon completion of the construction of the manufacturing plant, the commencement and commissioning of Glovmaster’s operations are expected to take place in the third quarter of 2021.

Luster also noted that Glovmaster will focus its market presence in Malaysia, and may expand overseas should the business operations and production capacity increase in the near future.

Under the agreement, Luster will contribute a total of up to RM50 million to finance the capital expenditure to undertake the gloves business. To that end, it entered into several subscrption agreements with third parties to place out a total of 20% or 482.15 million shares at 12.5 sen per share, which will raise gross proceeds of up to RM60.27 million.

The proposals are expected to be completed in the fourth quarter this year.

Source: The Sun Daily Posted on : 19 October 2020

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