7/27/2019 AmBank Kossan Declares 7 Sen Dividend May 2013

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According to an announcement on Bursa Malaysia, Kossan Rubber Industries (Kossan)has declared a final tax-exempt dividend of 7 sen/share in respect of the financial year

ended 31 December 2012. The entitlement date has been fixed for 2 July with payment on16 July.

Together with the 5 sen tax-exempt interim dividend it announced back in 3Q12, Kossan ispaying out a total 12 sen gross DPS for FY12. This results in a 12ppts YoY improvement inits gross dividend payout ratio to 37%. In the past, dividend payouts have ranged from 20%to 43%.

While the proposed final dividend came in higher than our forecast of 4 sen, we are not toosurprised since management had indicated its intention of doubling its payout ratio to40%-50% within the next 2-3 years.

In light of this, we have raised our gross DPS forecasts for FY13F-FY14F by 3%-12% to 13.5sen and 15 sen, respectively, as we tweak upwards our payout ratio assumptions to be in-

line with FY12s. At the current price, this translates into yields of 3.6% to 4% the highestamong its peers. We reckon that Kossans dividend yields are attractive for a defensivegrowth sector stock and would help draw interest from income investors.

In an additional bid to elevate the stocks liquidity, management has also hinted at thepossibility of undertaking some form of corporate exercise (bonus issues, free warrants,etc.) The last time it did a bonus issue was in 2010 (1-for-1).

We believe this payout ratio is sustainable moving forward as Kossan has a healthybalance sheet (net gearing of only 0.2x) and the ability to generate operating cash flowsabove the RM100mil mark each for FY13F-FY15F.

No change to our BUY recommendation and estimates for Kossan. Our fair value ofRM4.60/share is pegged to a fair PE of 12.5x its FY13F EPS (sector average is 14x). Therobust global glove demand (FY13F: +10% to +15%), low input cost environment and the

possibility of a worldwide pandemic stemming from the H7N9 avian flu augurs well forKossans earnings.

RUBBER PRODUCTS

KOSSAN RUBBERINDUSTRIES(KRI MK, KRIB.KL) 19 April 2013

Declares final dividend of 7sen/share

Company report BUYCheryl Tan

cheryl-tan@ambankgroup.com

+603 2036 2333

Price: RM3.78Fair Value: RM4.60

Rationale for repor : Company Update

PP 12260/06/2013(032378)

QuickTak

e

YE to Dec FY12 FY13F FY14F FY15F

Core EPS (Sen) 32.7 36.9 41.1 49.6PE (X) 11.6 10.2 9.2 7.6

Source : AmResearch

Published by

AmResearch Sdn Bhd (335015-P) (A member of the AmInvestment Bank Group)1 5 t h F l o o r B a n g u n a n A mB a n k Gr o u p55 Jalan Raja Chulan50200 Kuala LumpurTel : (03)2070-244 4 ( research)F a x : ( 0 3 ) 2 0 7 8 - 3 1 6 2

Printed by

AmResearch Sdn Bhd (335015-P) (A member of the AmInvestment Bank Group)1 5 t h F l o o r B a n g u n a n A mB a n k Gr o u p55 Jalan Raja Chulan50200 Kuala LumpurTel : (03)2070-244 4 ( research)F a x : ( 0 3 ) 2 0 7 8 - 3 1 6 2

The information and opinions in this report were prepared by AmResearch Sdn Bhd. The investments discussed or recommended in thisreport may not be suitable for all investors. This report has been prepared for information purposes only and is not an offer to sell or asolicitation to buy any securities. The directors and employees of AmResearch Sdn Bhd may from time to tim e have a position in or withthe securities mentioned herein. Members of the AmInvestment Group and their affiliates may provide services to any company andaffiliates of such companies whose securities are mentioned herein. The information herein was obtained or derived from sources thatwe believe are reliable, but while all reasonable care has been taken to ensure that stated facts are accurate and opinions fair andreasonable, we do not represent that it is accurate or complete and it should not be relied upon as such. No liability can be accepted forany loss that may arise from the use of this report. All opinions and estimates included in this report constitute our judgement as of thisdate and are subject to change without notice.

For AmResearch Sdn Bhd

Benny ChewManaging Director

7/27/2019 AmBank Kossan Declares 7 Sen Dividend May 2013

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Kossan Rubber Industries 19 April 2013

AmResearch Sdn Bhd 2

TABLE 1 :VALUATION MATRIX

YE to Dec FY11 FY12 FY13F FY14F FY15F

Revenue (RMmil) 1,090.0 1,235.5 1,327.8 1,461.9 1,720.2Core net profit (RMmil) 89.7 104.5 118.0 131.6 158.5EPS (Sen) 28.0 32.7 36.9 41.1 49.6EPS growth (%) n/a 16.5 13.0 11.5 20.5Consensus EPS (Sen) n/a n/a n/a n/a n/aDPS (Sen) 7.0 12.0 13.5 15.0 20.0PE (x) 13.5 11.6 10.2 9.2 7.6

EV/EBITDA (x) 8.2 6.9 5.6 4.8 3.9Div yield (%) 1.9 3.2 3.6 4.0 5.3ROE (%) 19.1 18.8 17.9 17.5 18.6Net Gearing (%) 15.3 12.4 n/a n /a n/a

Source : Company, AmResearch estimates