Sanichi diversifies into rubber glove sector
22 Apr 2021
KUALA LUMPUR: Sanichi Technology Bhd’s latest corporate manoeuvre is to diversify into lucrative rubber glove industry via the issuance of up to 1.42 billion renounceable rights issue.
The rights shares, at eight sen each, are sweetened with 716.21 million free warrants.
This was on the basis of the basis of six rights shares together with three free warrants for every one existing share held by shareholders on April 23, Sanichi said in a statement today.
Sanichi plans to install and commission up to 15 double former glove-dipping lines in phases over the course of 36 months to manufacture medical grade nitrile gloves which is expected to yield a production capacity of over 3.11 billion pieces per annum.
For a start, Sanichi intends to use the proceeds from the proposed rights issue with warrants to buy, install and commission up to six double former glove-dipping lines.
Group managing director Datuk Seri Dr Pang Chow Huat is optimistic that the six production lines can yield a production capacity of up to 1.24 billion pieces of gloves per annum.
“At an average market selling price of RM328 per carton (1,000 pieces per carton), the estimated production capacity, in terms opf revenue, is RM408.08 million and based on conservative 30 per cent margin, the expected contribution to the group’s bottom line is RM122.43 million,” Pang said in the statement.
He added that the maximum capital it could raise from the rights issue was RM113.95 million.
This means based on data from industry average, Sanichi’s payback on investment which include the factory building is only 12 months after its six production lines are fully operational.
He said the actual number of glove-dipping lines to be acquired would depend on, among others, the proceeds that Sanichi was able to raise from the rights issue, the cost to acquire the glove-dipping lines and other related facilities as well as the demand for gloves at the relevant time.
The estimated total capital and investment outlay required for the installation and commissioning of six double former glove-dipping lines was RM41.50 million, while for 15 double former glove-dipping lines was RM86.5 million, he added.
The installation of the six double former glove-dipping lines is expected to commence by the third quarter of 2021 and be completed in stages by the third quarter of 2022.
The first glove-dipping line is expected to be completed by December 2021.
Sanichi plans to export the rubber gloves to countries with high Covid-19 infection rates such as the US and European countries, Africa, South America and India.
The global rubber gloves market size is expected to reach US$58 billion by 2026, expanding at a compounded annual growth rate 13 per cent during the from 2021 to 2026.
The global rubber gloves market by revenue is expected to witness 2.1 times the growth during the forecast period.