KUALA LUMPUR: Glovemaker YTY Industry Holdings Bhd is due for a flotation on Bursa Malaysia within the next two to three months, based on general market guidelines.

According to its prospectus exposure posted on the Securities Commission (SC) website, YTY is a rubber examination glove manufacturer with 20 years of experience, specialising in nitrile gloves.

The aim of the prospectus exposure is for the SC to invite public comments on the information disclosed in the prospectus, towards enhancing disclosure and promoting transparency to the fund-raising process.

YTY, which exports a large percentage of its products, has serviced global names such as Cardinal Health Inc, Kimberly-Clark Global Sales Inc and Adenna Inc for the last five to 16 years.

Its vendors comprising five individual shareholders will undertake an offer for sale of 71.65 million shares of 50 sen each, representing 25% of its paid-up capital of 286.6 million shares.

Of the total, 14.33 million shares will be made available for application by the public, 22.93 million shares to identified investors via a private placement, 28.66 million shares to  bumiputera investors approved by the ministry of international trade and industry and 5.73 million shares to directors, employees and business associates.

YTY will not receive any proceeds from the offer for sale. The gross proceeds will accrue entirely to the five vendors who will bear the underwriting commission, placement fee and brokerage costs. The company bears RM2.8 million of listing expenses.

The five vendors are its executive chairman Oh Tiam Sing (selling 30.64 million shares or 10.69% of the paid-up capital), executive directors Moh Ung Nang (3.71%) and Lim Loi Heng (4.59%), director Datuk Eii Ching Siew @ Yii Ching Siew (2.97%) and shareholder Wong Kok Wah (3%).

Upon listing, Oh will directly hold 28.84% and indirectly 2.1% of YTY, Moh a direct 11.34% stake, Lim 1.66% direct and 10.47% indirect stake, and Eii a direct 6.12% stake in the company.

As at July 31, the company had the capacity to produce 5.2 billion pieces of glove annually via 44 production lines located in Sitiawan, Perak. About 87% of its products are nitrile gloves and the remaining 13% natural rubber gloves.

YTY said almost all of the group’s revenue was derived from exports and over 95% denominated in US dollar. About 50%-65% of its total purchases are denominated in US dollar.

The company said as at the end of last year, it had an estimated 15.7% market share in terms of revenue from the export of synthetic rubber examination gloves in Malaysia. YTY sells its products only to OEM (original equipment manufacturers) in more than 25 countries. About 78% of its products are exported to the US as at end-FY10.

YTY said it had budgeted RM134 million for the construction of a new plant and acquisition of machinery to be operated on a piece of land adjacent to its current factory in Manjung, Perak,

To be carried out in three phases over the next two years, the expansion will increase its production capacity by 67% to 8.7 billion gloves per annum by FY12. It has started construction of the first two phases, which will be completed by the end of FY11.

Dividend payout
Subject to certain conditions, the directors intend to recommend and distribute gross dividends of not less than 40% of distributable net profit, commencing from the financial year ending March 31, 2012.

Applying a 40% payout rate to FY10, this would mean that shareholders could look forward to a dividend of 9.1 sen per share for the year.

This payout ratio would rank as one of the industry’s highest — along with Top Glove’s — as most other glovemakers have planned major capacity expansion plans.

In FY09, Top Glove declared dividends of 22 sen per share, or a payout ratio of 38%, an increase from 30% in FY08.

In its proforma results for FY10, YTY registered a net profit of RM65 million on the back of revenue of RM347.96 million, placing itself in the mid- to high-tier of the country’s list of rubber glovemakers, superseding Latexx Partners Bhd as the fifth-largest glovemaker in terms of sales.

For the last full financial year, the other top glovemakers registered the following revenues: Top Glove (RM1.53 billion), Kossan Rubber Industries Bhd (RM842.14 million), Supermax Corp Bhd (RM803.63 million) and Hartalega Holdings Bhd (RM571.89 million).

Mid-tier firms such as Integrated Rubber Corp Bhd, Rubberex Corp Bhd and Latexx had revenues in the range of RM150 million to RM350 million for the same period.

This article appeared in The Edge Financial Daily, August 27 2010.