Affin IB Research maintains Buy on Kossan, raises target price to RM4.30

Affin IB Research maintains Buy on Kossan, raises target price to RM4.30
Business & Markets 2013
Written by theedgemalaysia.com
Thursday, 12 December 2013 08:35

KUALA LUMPUR (Dec 12): Affin IB Research has maintained its Buy rating on Kossan Rubber Industries Bhd at RM3.81 with a higher target price of RM4.30 (from RM4.20) after raising its FY14-15 EPS forecasts by 2.2% and 10.5% respectively to account for: 1) more upbeat outlook on the company after the research house’s recent meeting with management; 2) capacity upgrade for both FY14-15; and 3) a stable margin environment from higher volume sales in its higher margin surgical gloves as well as technical rubber products.

In a note Dec 11, the research house said Kossan’s management also reaffirmed that its recent land acquisition deal in Klang would be completed by 1QFY14 and construction works for production facilities, equipped with 20 production lines will be completed by end-FY14.

“Hence, Plant 4 is expected to be commissioned latest by 2QFY15 and will be able to produce 5-6 billion pieces of gloves annually. Capex for FY15 will be around RM90 million, (RM20 million higher than our earlier forecast) for the construction of Plant 4 and machineries.

“We continue to like the company’s solid fundamentals and strong management team.

“Following our upward revision in FY14-15 EPS forecasts as we incorporate the additional production capacity arising from Plant 4, our price target is lifted to RM4.30 (from RM4.20) pegged to an unchanged target CY14 PER of 15x. KRI remains as our top sector pick. Buy!” it said.