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CIMB downgrades Karex as stock seen fully valued

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CIMB downgrades Karex as stock seen fully valued Empty CIMB downgrades Karex as stock seen fully valued

Post by Cals Tue 27 May 2014, 03:04

CIMB downgrades Karex as stock seen fully valued
Business & Markets 2014
Written by Ahmad Naqib Idris Adzman Shah of theedgemalaysia.com   
Monday, 26 May 2014 14:51

KUALA LUMPUR (May 26): CIMB Investment Bank Bhd downgraded Karex Bhd shares to “hold” from “buy” as the stock is deemed to be fully valued.

The downgrade is despite the condom manufacturer posting strong results for its third quarter and nine months (9MFY14) ended March 31, 2014. 

“Despite the strong 9MFY14 results, the dividend policy announcement and the fact that we still like the company’s strong fundamentals, we downgrade the stock from “add” to “hold”.

“Karex’s share price has risen by a whopping 92% since our initiation report in Nov 2013. Thus, we think that the current share price has factored in the company’s strong earnings growth potential,” said CIMB.

However, CIMB said there might be upside to Karex’s TP if the company outperformed earnings forecasts.

According to CIMB's note, Karex’s 9MFY14 core net profit increased by 72.6% year-on-year on the back of revenue which rose 32%.

“The strong results were driven by the higher number of condoms sold due to the rise in production capacity,” said CIMB 

Karex announced a dividend policy at a minimum of 25% of its annual profit. The dividend policy is seen as a positive move, but the yield of less than 2% is considered to be low, according to CIMB.
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