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Monday, August 20, 2018

Kenanga maintains underperform on Kossan Rubber

Monday, 20 Aug 20188:48 AM MYT

KUALA LUMPUR: Kenanga Research said Kossan Rubber Industries Bhd

's 1H profit after tax and miniority interest (Patami) of RM88mil came in within its and consensus full-year estimates.

The research house maintained its underperform rating on the counter with a target price of RM3.45.

"YoY, 1H18 revenue fell 1% due to lower contribution from the Gloves division which was largely mitigated by the improved performance in the TRP division compared with 1H17.

"The gloves division’s revenue fell 2.8% mainly due to flat ASPs and more than offset by higher volume sales (+5.8%).

"The TRP division’s revenue rose 7.7% in 1H18, while
PBT soared 60.9%. The improved performance was mainly attributable to increased sales of higher margin products," it said.

Kenanga noted that the former issue that had affected Plant 16 has been resolved and fully commissioned in August 2018.

Plant 16 will focus on the group's patented Low Derma Technology gloves.

" In anticipation of higher demand for Low Derma nitrile gloves, the group has started the construction works for Plant 17 and 18.

"Construction works for Plant 17 (1.5b pieces), 18 (2.5b pieces) and 19 (3b pieces) are underway and expected to be fully commissioned by the 4Q 2018, 2Q 2019 and 4Q 2019, respectively.

"Upon completion, these three new plants are capable of producing additional 7b pieces of gloves per annum, bringing the Group’s total installed capacity to 32b
pieces of gloves per annum by FY19."


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