CIMB Research cuts Latexx to Neutral

KUALA LUMPUR: CIMB Equities Research has downgraded LATEXX PARTNERS BHD [] from Trading Buy to Neutral and reduced its target from RM2.60 to RM2.44.
It said on Monday, July 25 the aborted Latexx Partners-YTY merger was
a negative surprise as indications from both parties in recent weeks
were optimistic.
“The biggest winner from this is Hartalega (Outperform), which remains the world’s largest nitrile glove maker,” it said.
CIMB Research said Hartalega trades at a forward P/E of only 9.1
times despite having sector-leading profitability (38% ROE) and yields
(5.1%).
“This is the second deal Latexx has failed to consummate in six
months and we now attribute a higher risk premium to the stock,” it
said.
CIMB Research maintained its forecasts but downgrade Latexx from
Trading Buy to NEUTRAL. Our target is cut from RM2.60 to RM2.44 based on
a lower forward P/E of 9.8 times (previously 10.4 times) or a 25%
discount (previously 20%) to Top Glove.
“While the news is negative, we believe it’s balanced by better 2H11
results. We recommend a switch to Kossan, our top pick,” it said.