PETALING JAYA: While there appears to be a throng of players venturing into the healthcare sector now, the market is yet to be deemed “saturated”, given that it is still early to gauge when the supply and demand of personal protective equipment (PPE), rubber gloves and other healthcare products will reach equilibrium.
Two days ago, four companies announced their diversification into healthcare-related businesses, including Iconic Worldwide Bhd (into PPE business), LKL International Bhd (glove deal), Vizione Holdings Bhd (glove-making) and MQ Technology Bhd (Covid-19 vaccine).
This is in addition to companies that have diversified into the glove business (Karex Bhd, Inix Technologies Holdings Bhd, AT Systematization Bhd, MSCM Bhd); the PPE business (ACO Group Bhd, Caely Holdings Bhd, Ni Hsin Resources Bhd); face masks (Komarkcorp Bhd, Notion VTec Bhd, Pecca Group Bhd, Titijaya Land Bhd) and more.
Rakuten Trade vice president of equity research Vincent Lau said the prospects of the healthcare sector are good given the strong demand for healthcare products, which is why these companies are jumping on the bandwagon.
“It’s a good sign (that healthcare is booming),“ Lau told SunBiz, adding that businessmen will try their hands at lucrative activities.
“We don’t know how they will perform (by diversifying into this healthcare business). Time will tell. How profitable or whether it is a good move or not, it remains to be seen until we look at their financials.
“With a vaccine or not, glove demand will still be there. Healthcare products, masks, PPE products will still be needed whether we have the Covid-19 or not. It’s the new normal.”
An industry source said a “bubble” will only occur once all the players are in operation.
“Now they’re still in their works to set up their facilities. There will be a bubble once demand dwindles. Glove demand will sustain and stay on the high side for the meantime and won’t drop so fast.”
He added that although the healthcare sector is seeing many newcomers, it is still early to tell when supply and demand will reach equilibrium. Moreover, new players need time to set up their facilities before they can commence operations.
“More visibility of the supply and demand equilibrium can be seen next year, not this year.”
The industry source said many of the non-glove players entered the glove manufacturing market due to strong profit visibility.
“Most of these ventures can pay off. The payback (cash flow generated after initial capex outlay) period is short so people are taking chances. Businessmen need to take risks to make money.”
The addition of these players is also good for the economy, as it strengthens export, expands the supply chain and create more jobs.
However, an analyst opined that it will be challenging for newcomers tap into the market as many have their suppliers already.
“By the time they built their factories, demand will stabilise by then. But more players will be good as it ensures quality products due to the competition,” he noted.
