KUALA LUMPUR (Jan 12): ECM Libra Research is recommending KOSSAN RUBBER INDUSTRIES BHD [] a Buy and said commercial operations of the company’s new production lines are expected to commence at end-2Q12.
It said the new capacity would increase output by 2 billion gloves to 14 billion, adding that Kossan has managed to secure buyers for more than 85% of the new capacity.
In a note Thursday, ECM Libra said the current utilisation rate as at end Dec 2011 was 90%.
The research house said valuations were undemanding with Kossan trading at 9.7x FY12 EPS (vs Top Glove’s 24x and Supermax’s 11x FY12).
“The valuation gap should narrow as: (i) Kossan moves up the value chain by offering higher margin surgical and clean room gloves; and (ii) Kossan’s product mix contains less natural rubber glove which is sensitive to movements in latex price.
“Recommend BUY with RM4.02 target price based on 11x FY12 EPS, in line with its historical average,” it said.
It said the new capacity would increase output by 2 billion gloves to 14 billion, adding that Kossan has managed to secure buyers for more than 85% of the new capacity.
In a note Thursday, ECM Libra said the current utilisation rate as at end Dec 2011 was 90%.
The research house said valuations were undemanding with Kossan trading at 9.7x FY12 EPS (vs Top Glove’s 24x and Supermax’s 11x FY12).
“The valuation gap should narrow as: (i) Kossan moves up the value chain by offering higher margin surgical and clean room gloves; and (ii) Kossan’s product mix contains less natural rubber glove which is sensitive to movements in latex price.
“Recommend BUY with RM4.02 target price based on 11x FY12 EPS, in line with its historical average,” it said.
