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HLIB Research maintains Hold on Kossan, trims target price to RM3.70

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HLIB Research maintains Hold on Kossan, trims target price to RM3.70 Empty HLIB Research maintains Hold on Kossan, trims target price to RM3.70

Post by Cals Thu 21 Aug 2014, 12:53

HLIB Research maintains Hold on Kossan, trims target price to RM3.70
Business & Markets 2014
Written by theedgemalaysia.com   
Thursday, 21 August 2014 08:36

KUALA LUMPUR (Aug 21): Hong Leong IB Research (HLIB) has maintained its Hold rating on Kossan Rubber Industries Bhd with a lower target price of RM3.70 (from RM3.91) and said the company’s H14 core net profit of RM64.6 million (-6.0% yoy) came in below expectations, accounting for 40.2% and 37.6% of HLIB and consensus, respectively.
In a note Thursday, the research house said the deviation was due to lower-than-expected sales impeded by lower gloves output due to production downtime associated with water rationing.
It explained that the revenue contraction in glove division was partly offset by strong growth in technical rubber division, attributed to higher export sales.
HLIB said Kossan’s expansion plan was on schedule towards achieving total capacity of 22bn pieces of gloves per annum by 2015.
“Due to the abovementioned deviation and latest expansion plan, we tweaked our production forecasts. As a result, FY14, FY15 and FY16’s EPS were trimmed by 5-6%.
“Maintain Hold as we revised our target price downward by 5.2% from RM3.91 to RM3.70, based on unchanged P/E of 12.8x CY15 EPS.
“This is derived by discounting 4x to the average of Hartalega and Top Glove’s P/E multiples. On average, Kossan has been trading at 4x discount to peers for past 5 years,” it said.
 
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