Enviro-Hub Holdings - SAC Capital 2022-10-13: Site Visit To R Pharmacy & Pastel Glove Factory


Enviro-Hub Holdings - Site Visit To R Pharmacy & Pastel Glove Factory

  • Enviro-Hub (SGX:L23) is embarking on new venture to diversify from its mainstay, e-waste recycling and metal refining.
  • Following up on our initiation report – Enviro-Hub Holdings - SAC Capital 2022-09-08: E-Waste Recycling Buttressed By Legislations, Hybrid Work, we made a site visit on 5-7 Oct 22 to understand more about Enviro-Hub's new healthcare business segment: gloves manufacturing and retail pharmacy.
  • To recap, Enviro-Hub acquired 25% in Pastel Glove on Feb 21, and the rest of 75% on Oct 21. With Pastel Glove having a 40% stake in Pastel Care and the remaining held by Law Siau Woei, they opened their first retail pharmacy, R pharmacy, on 16th April 22 in Klang, Malaysia, targeting to be the leading healthcare supplier in the region.

R Pharmacy

  • R Pharmacy targets to have 25 and 90 stores in the heartlands of Malaysia by Apr 23 and FY24E respectively. Currently, there are 7 operating stores. The management is scaling up their distribution centre to extract higher economies of scale as more stores start to operate. Half of the procurement team are pharmacists, hence able to identify more efficacious products, thereby lifting sales.

Pastel Glove

  • Pastel Glove has shifted its strategy from product mix (20% specialty & 80% latex in 1H22) to only latex gloves on the back of:
    1. rising demand for natural rubber gloves.
    2. improving price and margins.
    3. shortage of supply as the industry moves away to focus on nitrile healthcare gloves during the pandemic.
    4. oversupply of nitrile gloves in China.
  • However, the management team conveyed that they might be focusing back on specialty gloves in 4Q22 which command 10-15% higher margins than latex gloves.
  • Pastel Glove's clients are mainly from China and US. According to Statista, Thailand and Malaysia is the largest and seventh-largest natural-producing rubber countries in 2021. The combined labour and energy are also substantially lower in Malaysia than in Thailand and China according to ASEAN Briefing. The US does not manufacture rubber gloves due to the limited supply of raw materials and overall higher cost.
  • Refer to the report attached below for more details and photos of the site visit.
  • Several initiatives are in the works to lift sales and margins.
    • Certification such as ISO and SMETA is in process, and once attained, the Group can attract higher-tier customers.
    • Management is looking to secure long-term contracts (6-12 months) to provide visibility.
    • Gloniks, Pastel Gloves’ in-house brand, will be launched soon.

Enviro-Hub - Earnings and valuation

Yeo Peng Joon SAC Capital Research | https://www.saccapital.com.sg/ 2022-10-13
SGX Stock Analyst Report NOT RATED MAINTAIN NOT RATED 99998.000 SAME 99998.000