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Stocks In Focus MY (EA Hldgs, Glomac, Top Glove Corp) – 19/03/15
Malaysia Daily Bulletin | 19 March 2015

EA Holdings Eyes 20% Stake In Cekap Air

  • EA Holdings is looking to acquire 20% equity interest in Cekap Air RM47 million which will allow it to diversify its existing business operations into mechanical and electrical (M&E) engineering and construction project management consultancy businesses.
  • The firm shared that the deal, which will be satisfied via the issuance of 470.4 million new shares of the company at RM0.10 each, will allow it to expand its marketing reach to the other industries that Cekap and its wholly-owned subsidiary WY Consultancy & Development are involved in, thereby reducing its reliance on its current mix of customers which are mainly in the services industry.
  • New business activities in the M&E engineering business and construction project management consultancy business may contribute 25 percent or more of the net profits and/or result in a diversion of 25 percent or more of its net assets in the future, according to the company.

Significance: EA Holdings noted that it intends to continue with its existing core business and, upon completion of the proposed diversification, be principally involved in the IT industry and the M&E engineering and construction industry.

Investment Properties Lift Glomac’s Profits

  • Glomac posted a 3 percent increase in its net profit to RM23.4 million for 3Q15 against the RM22.7 million it recognized a year ago on the back of a fair value gain on investment properties. However, revenue during the quarter decreased by 40 percent from RM183.7 million to RM111 million, mainly due to the completion of Damansara Residences and tail-end projects in Bandar Saujana Utama.
  • The company said sales would increase considerably in 4Q15 since it foresees that most of its targeted sales totalling RM822 million will be realized by then. It is launching new phases of terrace houses in Lakeside Residences, Puchong, with estimated gross development value (GDV) of RM151 million, which has met healthy response with previous launches in the integrated residential development fully sold.
  • The firm also has its maiden launch at Saujana KLIA, with the first phase comprising 284 units of double storey terrace houses with GDV of RM122 million fully taken-up. The RM1.1 billion affordable township has aroused interest because of its strategic location and proximity to KLIA/KLIA 2, Putrajaya, Cyberjaya and the mature housing areas of Dengkil, Nilai, Salak Tinggi and Banting.

Significance: While the company predicts that the future environment will be difficult, it hopes to perform satisfactorily with the unbilled sales in hand and future launches. Meanwhile, it has a strong position with development projects that meet present demand in the landed residential and affordable market segment and has strategic landbank with an estimated GDV of about RM7 billion for future launch.

Top Glove In RM1b Expansion Mode

  • Top Glove Corporation, which is presently in a net cash position of RM142.8 million, is on the lookout for merger and acquisition (between RM10 million and RM1 billion) opportunities to widen its business scope. The company said it was searching for companies in similar and related industries in line with its annual key performance index (KPI) like glove factories and those involved in packaging material or glove machinery, preferably in Malaysia. It feels that cash would not be an issue here since it has a healthy balance sheet in hand.
  • The firm’s net profit came in 35 percent higher at RM56.1 million on the back of a 4.4 percent increase in revenue to RM572.2 million for 2Q15. It has attributed the stronger earnings to a 5.3 percent growth in sales quantity from 2Q15. The group’s performance has improved as a result of a consistent growth in demand for natural rubber gloves from emerging markets, the decline in raw material prices, on-going internal improvement in quality, efficiency and cost control measures, the stronger greenback as well as the post-consolidation turnaround of its China operations.
  • The group’s expansion on Factory 27 in Lukut, Port Dickson, Factory 6 in Thailand and construction of Factory 30 would bring the number of production lines and capacity to 538 and 52.2 billion gloves per annum by September 2016.

Significance: Going forward, the company will do its best to penetrate a market where customers are switching from natural rubber gloves to nitrile gloves by participating in more trade shows and forging closer ties with the medical industry. It adds that it has the capacity to meet their requirements, demand and pricing. Meanwhile, it will be paying more attention to China, India and other emerging markets, which have seen tremendous improvements while it concentrates on its present key markets like Australia, United States, Germany, Spain, United Kingdom and Japan.

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