HONG SENG FORMALIZES THE RM44.69 MIL SUBLEASE DEAL IN KEDAH RUBBER CITY
The company revealed plan to spend RM1.5 billion over 5 years for its expansion in the gloves manufacturing and nitrile butadiene latex business in the city
Hong Seng Consolidated Berhad (“Hong Seng” or “the Company”) (Stock Code: 0041) announced today that its wholly-owned subsidiary Hong Seng Industries Sdn Bhd (“HS Industries”) has entered into a Sublease Agreement with Northern Corridor Implementation Authority (“NCIA”) for the sublease of a 102.6 acres industrial land located at Kedah Rubber City (“KRC”) for a total cash consideration of RM44.69 million for a period of 60 years.
The sublease is for the purpose of setting up a nitrile butadiene latex (“NBL”) manufacturing plant in KRC with an option to renew for another 30 years. The Company has earmarked a total investment of RM1.5 billion for its business expansion in KRC over the next five years from 2022 onwards, and it is expected to attract RM5 billion in private investments and create 2,600 new job opportunities in the northern region. The business expansion shall also include the expansion of its current gloves manufacturing business.
Hong Seng’s investment is part of the total RM16 billion investment generated in the Northern Corridor Economic Region (NCER). This is in line with the government’s consistent efforts to increase investors’ confidence in the country’s economic fundamentals as well as provide opportunities to the Rakyat. The NCER is said to be creating a total of 19,652 new jobs.
The virtual event today was witnessed by YAB Prime Minister of Malaysia Tan Sri Dato’ Haji Muhyiddin bin Haji Mohd Yassin and YAB Menteri Besar of Kedah Tuan Haji Muhammad Sanusi bin Md Nor. Also in attendance were YB Minister of Finance Tengku Datuk Seri Zafrul bin Tengku Abdul Aziz, YB Minister in the Prime Minister’s Department (Economy) Datuk Seri Mustapa Mohamed and YBhg Chief Executive of NCIA Datuk Seri Jebasingam Issace John.
A filing with Bursa Malaysia showed that HS Industries is desirous of building and operating a NBL manufacturing plant with a planned capacity of 480 kilo-tonnes per annum (“KTPA”) (120 KTPA each phase) in KRC. KRC is part of the development of Northern Corridor Economic Region, which has been identified under the Ninth Malaysia Plan to promote balanced and equitable national economic growth.
The sublease deal will be funded via a combination of internally-generated funds, bank borrowings, proceeds received from the exercise and conversion of the convertible securities of the Company and/or future fundraising exercises.
Commenting on the Company’s investment in KRC, Hong Seng Group Managing Director Dato’ Teoh Hai Hin said that the investment marked an official foray of the Company into the NBL business, which shall complement its existing gloves manufacturing business, adding that the Company is in the midst of setting up its first 6 units of nitrile butadiene rubber double former glove dipping production lines in Sungai Petani, Kedah. He also thanked the parties involved in this project, which represented yet another public and private partnership to build a conducive business environment.
He added that the ability to secure constant scarce NBL supply is a determining factor for a glove manufacturer. NBL is the raw material used to produce nitrile gloves, the most preferred gloves in the healthcare sector.
“To be competitive in the gloves industry, it is important to have a timely and sufficient supply of NBL, which is in huge shortage across the world. Besides fulfilling the demand for our own gloves manufacturing plant, we will be able to capture the business opportunity in the NBL market locally and regionally. This will enable us to be an integrated glove and NBL manufacturer in Malaysia by having both upstream and downstream segments of the glove manufacturing supply chain,” he elaborated.
According to a report by Global Market Insights, the projected market value of NBL will reach up to US$2.5 bil by 2026 from US$1.32 bil in 2019. Therefore, the NBL market is expected to hit a growth rate of over 7.5% compound annual growth rate from 2020 to 2026 following the increasing healthcare spending across the globe coupled with growing demand for gloves from the food and industrial sector will further augment the market growth.
The proposed NBL project will enable Hong Seng to delve into the end-to-end of the nitrile glove production supply chain from the raw material to the final consumer product, besides facilitating the long-term growth potential and potentially improving the financial performance of the Group moving forward.
