Analyst Research Report Snapshot

Title:

Company Update – Kossan (BUY, maintain) - In the pink of health

Price:

$35.00

Provider:

Affin Investment Bank

Date:

15 Jul 2013

Pages:

4

Type:

AcrobatPDF

Companies referenced:

KRIB.KL

Available for Immediate Download
Summary:

On set for larger capacity, FY13-15 EPS revised upwards by +13.6% to 23% Our recent meeting with Kossan’s (KRI) management reaffirmed our positive view on KRI. Key takeaways from the meeting includes: 1) an additional 120m pcs of gloves coming on stream in Dec 2013; 2) further glove capacity of 5bn pcs by end-FY14; 3) a stable margin environment from higher volume sales in its higher margin technical rubber products despite lower selling prices due to lower raw material cost; and 4) a total capex allocation of c. RM70-75m p.a over the next 3 years for the building of 6-7 new plants on a 56-acre piece of land in Batang Berjuntai. We are forecasting a revised FY13 net profit growth of 34% yoy compared to our earlier forecast of +16.9% yoy. Our FY13-15 EPS revision of +13.6% to +23.5% takes into account: 1) an upward revision in our gloves production assumption to 16.12bn and 21bn pcs (from 15.6bn and 19bn pcs) in FY13 and FY14 respectively; and 2) lower cost assumption as KRI produces higher niche products eg thinner gloves (from 4mg to 3.8mg).

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