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Wednesday, May 2, 2018

AmInvestment maintains buy on Luxchem

ANALYST REPORTS
Wednesday, 2 May 20189:07 AM MYT

KUALA LUMPUR: AmInvestment Research reiterated its buy recommendation on Luxchem Corp Bhd with a lower fair value of 84 sen a share.

It trimmed its FY18F-FY19F net profit forecasts by 13-17% due to stiffer competition in the unsaturated polyester resin industry and the weaker USD versus the ringgit.

The research firm said Luxchem's 1QFY18 core net profit came in slightly below expectations at RM9.9mik, a 25% decline on year that accounted for 18% of AmInvestment's full-year forecast.

It said the decline was due to a 12% depreciation in the USD/MYR as well as a 4% on year contraction in volume due to minor supply constraints in the latex industry.

"In addition, the group’s UPR manufacturing arm, Luxchem Polymer Industries (LPI), was operating at circa 88% capacity in 1QFY18, down from nearly 100% in 2017.

"Nevertheless, these negatives are partially offset by upward trending chemical prices, especially in the fiberglass reinforced plastics (FRP) and polyvinyl chloride (PVC) industries."

AmInvestment Research said Luxchem's management believes the UPR industry will be more competitive with the entry of Taiwan-based Eternal Materials, whose new facility in Johor will commence manufacturing UPR and other synthetic resins by 2QCY18.

However, management indicated that expansion in the glove industry, which contributes about 30% of the group's turnover, will continued to drive demand in FY18F, it said.

Read more at https://www.thestar.com.my/business/business-news/2018/05/02/aminvestment-maintains-buy-on-luxchem/#zCkG2dqxMFbYIHAO.99

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