This article first appeared in The Edge Malaysia Weekly on September 21, 2020 - September 27, 2020

THIS year has been a busy one for RGT Bhd, which designs and manufactures hygiene and air care dispensers. Its factory floors are running non-stop seven days a week while its workers are putting in extra hours.

Demand for its products has doubled, thanks to the Covid-19 pandemic.

“We are now running at full capacity”, from 50% to 60% previously, RGT CEO Lim Seat Hoe tells The Edge in an interview. “We recently added new production lines and converted our air care lines to hygiene lines to accommodate increased demand from our clients. Anyway, demand for air care products is now low,” he says.

Apart from sanitiser dispensers and air care fresheners, RGT also manufactures soap dispensers. Many investors may have overlooked the fact that the company is no longer just a plastic moulding manufacturer.

A decade ago, it started to be engaged in the research and development of its products, allowing it to become involved in product development up until the stage where the products are packaged and ready for commercial use. Today, the company is recognised as a one-stop solution provider for air care and hygiene-related products.

Notably, RGT is a sole manufacturer of soap and sanitiser dispensers to several large US-based cleaning facility services companies and its products are exported to countries all over the world.

With its factories already operating at maximum capacity, RGT is in the midst of expanding its manufacturing floor space to help it meet demand from new customers, according to Lim.

In January, RGT purchased a 60,000 sq ft land parcel in Bukit Minyak, Penang, behind its current factory space, for RM7.5 million. The expansion is expected to be completed by June 2021, just in time for it to start manufacturing for new customers in the pipeline.

While the pandemic has resulted in a surge of demand for RGT, Lim says it was the trade war between the US and China that pushed along its expansion plans.

“We had new customers who approached us last year because of the trade war. We are the only ones that specialise in this business in Malaysia and we are well regarded by those who are in this industry,” he explains.

While dispensers are replaced every one to two years, RGT is likely to see a lift in its revenue going forward as it is venturing into sanitiser and soap refills, which will give it repeat orders. It is currently working with customers in developing the refills.

Unlike the many new players that have gone into glove manufacturing because of the pandemic, Lim believes that the industry RGT is in is not one that can be ventured into easily because of the complexity in manufacturing dispensers, compared with gloves.

“For gloves, it is quite straightforward … [It just requires] investment in machines. But for us, the manufacturing process is quite complicated. And if a new player wants to enter this industry, it would be difficult for them because they cannot afford to start small. They would need to have various facilities, such as engineering and research and development. It is quite a niche market,” says Lim.

He notes that there are no spot orders involved, but customers stay for the long term.

“When the customer starts a business with you, it will grow. They have to evaluate whether they have the potential to grow with us or not. If you can’t grow with them, they wouldn’t want to partner you.

“They want to see what is your value-add to the business. We are confident that we can provide value-added service for them,” he explains.

Lim shares that RGT has big plans for organic growth over the next five years. In five years, it is looking to hit US$100 million in revenue, banking on new customers coming on board and an increase in demand from existing customers.

Nevertheless, he admits that there could be a slowdown in demand for its hygiene-related products should the pandemic end. By then, this would be offset by an increase in demand for its air care products.

“I think it will be a new norm for people to wash or sanitise their hands more, going forward, compared with pre-Covid-19. The hygiene-related division might see a slowdown in demand but I believe demand for air care products will increase. Our products complement each other,” says Lim.

With the growth surge due to the pandemic, Lim notes that RGT is “just lucky to be in this line” at this time.

“We can’t predict what is going to happen. What we can do is put our focus on what we do best. So, when the pandemic happened, it was to our advantage. Sometimes, you can’t be smart about it. Covid-19 has helped us to speed up our timing in terms of growth,” says Lim.

For its fourth financial quarter ended June 30, 2020, RGT reported a 38% year-on-year increase in revenue to RM26.33 million, while net profit rose 36.5% y-o-y to RM2.14 million.

As at June 30, the company’s cash pile stood at RM28.54 million.

For the full FY2020, RGT reported a weaker revenue of RM77.49 million, down 18% from RM94.52 million in the previous year. Its net profit was also down 18% to RM4.97 million from RM6.09 million in FY2019.

The decline was attributed to slower air care sales to the automotive sector in the US while its net profit was also affected by one-off and additional expenses incurred during the Movement Control Order period.

Since the start of the year, RGT’s share price has gained 177%. Last Thursday, its share price closed at 50 sen, giving the company a market capitalisation of RM291.49 million.

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