Saturday, November 03, 2007

Masteel diversification into BioTech

Just the other I was musing about KFC making a small investment into the tea business. I mean do chicken and the tea business mix? Would KFC be serving Lipton tea in their snack packs? But tea with fried chicken? That's just got to be a weird mix. Shouldn't KFC be sticking to what it knows best, which is the chicken business?

Then this morning, I saw an article posted on BTimes on about our fifth largest steel maker, Malaysia Steel Works (Masteel) is making a diversification into the biotech business, combining with Belgian company IBA Molecular to set up a local firm named Bio Molecular Industries Sdn Bhd to produce cancer-treatment drug.

No cost of investment was mentioned.

Here is the announcement posted on Bursa website:

And again, it makes you really wonder what's happening. Steel makers and biotech?

Firstly, steel makers are enjoying a change of fortune with the raise of steel prices. And Masteel is certainly enjoying better profits this year, however, as a company Masteel is still highly geared. A glance at its latest earnings would reveal that this company has nett debts of close to 200 million. Which begs the question, why is Masteel making such a diversification? How much does a steel maker know about producing a cancer-treatment drugs? Shouldn't it stick to what it knows best?

I really don't know what's happening with our companies.

**** Edit ****

Just realised that the Star Biz carried an article on it:
RM40mil investment in biotech project

  • KUALA LUMPUR: Bio Molecular Industries Sdn Bhd (BMI) will invest RM40mil in its maiden biotechnological project to set up the largest commercial radiopharmacy in Malaysia.

    The facility will specialise in the production of FDG, a diagnostic radiopharmaceutical used in PET (positron emission tomography) scans to detect and monitor the treatment of cancer.

    The facility, to be completed in the second half 2008, will be built on a two-acre site near the KL International Airport in Sepang.

    Chief medical director Dr Loh Poh Kooi said the facility, once operational, would manufacture FDG for use in hospitals and imaging centres in Malaysia and around the region.

    “Most radiopharmacies (in Malaysia) are of smaller scale and located in hospitals, where they cater to in-house and local needs rather than to regional demand,” Loh told a briefing yesterday....

A rm40 million investment!

My oh my!

  • BMI is a joint venture between main board-listed Malaysia Steel Works (KL) Bhd (Masteel) and Belgium's IBA Molecular, with the former holding a 90% majority stake in the venture.

    Masteel will manage the complex processes of producing the pharmaceuticals, while IBA Molecular will provide specialist equipment called Cyclotrons to produce a range of pharmaceuticals, including FDG.

    Masteel managing director Tai Hean Leng said the RM40mil investment comprised shareholder equity and debt financing. He said it was still too early to forecast the expected revenue from the venture.

    According to Tai, Masteel is venturing outside its core steel business because of the potential of biotechnology.

    “We are investing in the biotechnological sector because it has potential for high growth and high earnings.

    “The steel industry can be quite cyclical – up one year and down the next. This is a way for us to even out our earnings. We want to see steady growth all the time,” Tai said.