IRCB ... Debt-Free, Turnaround, Regularization Plan To Steer Out PN17

Bursa Malaysia had given nod to IRCB to embark on its regularisation plan to steer itself out of Practice Note 17 (PN17) status.

For the past one year or so, the new management had been putting its house in order and it is now (July 2014) on a better platform to rejuvenate the business.

IRCB chairman Lim Boon HuatHe and the MD, Cheang Phoy Ken, came into the company in January 2013, they have pumped in around RM44mil to revive the loss-making company and settle its debts.

IRCB, which has turned debt-free since September 2013, also showed a small net profit in its first quarter ended April 30, 2014.

For the first quarter ended April 30, 2014, IRCB posted a net profit of RM286,000 versus a net loss of RM10.06mil for the corresponding quarter last year.

For FY14, it recorded a net loss of RM19.26mil on a revenue of RM134.70mil.

IRCB’s proposed capitalisation plan mainly entails capital advances of RM44.8mil given in 2013 to be converted into 224 million new IRCB shares and a right to subscribe for 112 million shares granted to Cheang and private investor Keen Setup Sdn Bhd (KSSB). Cheang, together with KSSB, had advanced the RM44.8mil to IRCB to help the company settle its debts.

It expects to complete the regularisation plan within the next six months from July 2014.

Cheang, who is IRCB’s major shareholder with a 16.11% stake, is part of the new management seeking to turn around the fortunes of IRCB, which had slipped into losses from 2011 onwards. A year later, IRCB slipped into PN17 category after its unit, Comfort Rubber Gloves Industries Sdn Bhd (CRG), defaulted on RM71mil worth of debt obligations, which was more than 5% of the net assets of IRCB.

IRCB was once known as Berjuntai Tin Dredging Bhd and had adopted the present name in 2004 when it diversified into the synthetic and natural rubber glove industry a year earlier with the acquisition of CRG.

Cheang had bought the controlling stake in IRCB from Chip Lam Seng Bhd (CLS), which was the private vehicle of the Tan family, who once owned IRCB.

Cheang’s name may ring a bell, especially in the rubber glove manufacturing sector. He was formerly the MD and owner of rubber glove producer Seal Polymer Industries Bhd. Seal Polymer was acquired and privatised by rival Supermax Corp Bhd at RM1.10 a share in 2007 and subsequently delisted during the year.

The Cheang factor in IRCB makes the stock the one to watch. The market would be watching his return to the corporate world via IRCB after an absence of six years and whether it will make a difference.

After the capitalisation exercise, Cheang’s stake in the company may increase up to about 28%. Besides Cheang, the rest of the shareholdings are quite diversified, with the only other party holding above 5% being Lau Joo Yong, who had 6.25% as at June 2, according to IRCB’s 2014 annual report.

For KSSB after the regularisation scheme, it will remain a private investor in IRCB.

IRSB’s products currently (July 2014) account for close to 1% of the global market share of glove products. Malaysia is the world’s largest rubber glove exporter and IRCB produces about two billion gloves per year from its two manufacturing plants based in Taiping, Perak.

At the very top, Bursa’s largest glove manufacturer, Top Glove Corp Bhd, has a commanding 25% of the global market share with its capacity to produce 41.3 billion gloves per year. Supermax, meanwhile, produces up to 16 billion pieces of gloves per year, or approximately 11% of the market share of latex examination gloves.

Via its operating unit CRG, IRCB manufactures powdered and powder-free natural rubber latex and nitrile examination gloves, which are used in hospitals, nursing homes, industrial plants and food-handling processes. Lim says going forward, the focus will be on nitrile rubber gloves, which reap better margins.

Currently (July 2014), the company’s product composition mix is 50% nitrile and 50% natural rubber, unlike other glove manufacturers who may only focus on one type of glove. Its products are mostly exported to countries in the North American, Middle East, European, South American, African and Asia-Pacific regions.

The natural gas cost makes up about 6%-7% of the rubber glove manufacturers’ total operating costs.