Hong Seng hit new highs driven by new business plans

by NUR HAZIQAH A MALEK / pic by TMR FILE

HONG Seng Consolidated Bhd business portfolio continues to be remodelled ahead of the group intending to commission its glove-making factory next month. 

In its latest corporate exercise, Hong Seng has agreed to sell its wholly-owned Hong Seng Priority Management Sdn Bhd (HSPM) to Robust Potential Sdn Bhd for RM34.5 million cash, resulting in an estimated gain of RM31.2 million. 

HSPM is principally engaged in the business of providing hire purchase financing. 

On Aug 16, HSPM entered into a Collaboration Agreement with Sino EV Assembly Sdn Bhd to collaborate exclusively in Malaysia for the business of importing, assembling, marketing, financing and providing after sales service of the electric vehicles for a period of five years. 

The profit was to be shared based on the number of electric vehicles sold during the term of the Collaboration Agreement.

“Despite HSPM’s future earnings potential and prospects, the business would require significant working capital requirements in order to crystallise the potential earnings benefits. 

“Therefore, this timely opportunity to dispose at a gain is viewed positively by the group as it allows the group to immediately unlock and realise the value of the investment and assets in HSPM,” MD Datuk Seri Teoh Hai Hin stated in a release. 

The proceeds received from the proposed disposal will mainly be used by Hong Seng for working capital purposes for the group’s healthcare and gloves business which are more sustainable and have shorter gestation period and to fund for any future business expansions. 

Hong Seng has expanded its healthcare business from providing third-party and fourth-party logistics services to the entire end-to-end healthcare supply chain. 

This encompasses the front-facing and back-end processes, physical logistics, digital healthcare platform, medical laboratory facilities, research and development services, as well as the provision of medical and healthcare supplies for both private and public sectors. 

The group is still setting up its glove production plant in Sg Petani, Kedah, and it expects the new business venture into the manufacturing and trading of gloves to commence next month. 

The prospects of growing healthcare-based investments have seen Hong Seng shares make steep gains, appreciating from 53 sen on Jan 4 to RM2.09 as of last Friday, giving it a market capitalisation of RM5.33 billion. 

The stock was priced at 86 sen in June and began to edge higher after the group entered into an agreement with the Northern Corridor Implementation Authority for the sublease of a 41.52ha industrial land at the Kedah Rubber City for RM44.69 million for 60 years. 

The sublease would be for the setting up a nitrile butadiene latex manufacturing plant in the area, with the option to renew for another 30 years. 

The group had by then earmarked a total investment of RM1.5 billion for business expansion in the area over the next five years from 2022 and onwards, which is expected to attract RM5 billion in private investments and generate 2,600 career opportunities within the northern region. 

The expansion would also include the group’s continuous efforts to expand its current gloves manufacturing business, which had taken flight as an important segment after the pandemic outbreak. 

On July 8, the group announced that its wholly-owned subsidiary HS Bio Sdn Bhd has entered a joint-venture (JV) with LiGNO Holdings Sdn Bhd to market the latter’s medicinal products, further cementing its position as a supply chain management specialist for everything medical and healthcare-related.

The products would include bird’s nest, cordyceps sinensis and Tiger’s Milk mushrooms. 

Hong Seng, previously known as MSCM Holdings Bhd, noted that the JV is in line with its initiatives to further drive its healthcare-related business and increase the segment’s overall contribution to the group, while its share price steadily going upwards and pressing against the RM1 ceiling. 

Leading up to July 23, the group bagged a RM112 million contract to supply polymerase chain reaction test kits to the Ministry of Health, while its share price pressed on upwards and shot to a new high of RM1.81. 

More recently, the group issued new securities, namely private placement of new ordinary shares representing not over 10% of its enlarged number of issued shares on Sept 17, as well as bonus issue of up to 894.45 million free warrants for every three existing ordinary shares in Hong Seng.