MESB proposes diversification into waste recycling business
15 Jan 2021
MESB Bhd has proposed to diversify into the waste recycling business to include the collection and recycling of wastepaper, plastics scrap and scrap ferrous metal.
According to its Bursa filing, the group anticipate its future prospects for the present principal business in the trading and retailing of apparels and leather products to be challenging.
It pointed out that it has incurred losses in three of the past five financial years, particularly for the financial year ended June 30, 2020 in which it reported a loss after tax of RM26.78 million due mainly to the impairment losses on intangible assets in the retail segment amounting to RM25.17 million as a consequence of the Covid-19 pandemic.
On the other hand, MESB believes that the outlook and prospects of the water recycling business is better given the government’s target of reducing landfill waste by 40% and to recycle 30% of the country’s plastic waste by 2020.
The Malaysian Plastics Manufacturers Association estimates that the plastics recycling industry produces 1.5 million tonnes of recycled resins a year worth RM4.5 billion in revenue, and exports roughly 70% of its production.
With that it believes the future revenue generated from the new business segment will contribute better earnings potential and enhance shareholders’ value moving forward.
For this undertaking, the group acknowledged that it does not have any historical track record in such business but its director and major shareholder Wong Sak Kuan has experience in the recycling business through his involvement as director and controlling shareholders in companies in the recycling sector.
For the diversification, it noted that the MESB might enter into recurrent related party transactions of a revenue and/or trading nature with companies related to Wong from time to time, as such it also seeks shareholders mandate for such transactions.
It stated that the diversification and the related party transaction is subject to the approval of its shareholders at an EGM to be convened.
Source: The Sun Daily