Kossan 4QFY11 Results 20120227

7/27/2019 Kossan 4QFY11 Results 20120227

1/4

BIMB SECURITIES RESEARCH

MARKET INSIGHTMonday, 27 February, 2012

Results Review

PP16795/03/2012(029624)

| 1

Kossan Rubber Industries Buy

Inline Expecting a Better 2012Price: RM3.28

Target Price: (32.6% upside)RM4.35

Stock Data

Bloomberg Ticker KRI MK Altman Z-score 4.7Market Cap 1,048.7 YTD price chg 0.9%

Issued shares 319.7 YTD KLCI chg 1.8%

52-week range (H) 3.67 Beta 0.9

52-week range (L) 2.48 Major Shareholders

3-mth avg daily volume 393,459 Kossan Holdings SB 51.8%

Free Float 35.7% KWAP 7.6%

Shariah Compliant Y EPF 5.0%

Financial Derivatives n.a.

Share Performance (%) 1mth 3mth 12mth

Absolute (5.5) 8.6 9.9

vs. KLCI 1.4 (1.2) 1.4

Financial Highlights

FYE 31 Dec 2009 2010 2011 2012E 2013ETurnover 842.1 1,047.9 1,092.1 1,476.0 1,612.0

EBIT 95.0 156.0 123.6 169.2 182.3

Pretax profit 85.8 148.1 116.1 161.5 174.4

Net Profit 66.7 118.2 91.4 126.3 136.5

EPS (sen) 20.9 37.0 28.6 39.5 42.7

PER (x) 15.7 8.9 11.5 8.3 7.7

DPS (sen) 9.0 9.0 9.0 11.0 11.0

Div. Yield (%) 2.7% 2.7% 2.7% 3.4% 3.4%

NTA/share (RM) 1.12 1.40 1.54 1.83 2.15

EBIT margin 11.3% 14.9% 11.3% 11.5% 11.3%

Pretax margin 10.2% 14.1% 10.6% 10.9% 10.8%

Effective tax rate 21.5% 19.9% 19.9% 20.0% 20.0%

ROE 20.3% 29.4% 19.3% 23.2% 21.3%

ROA 9.9% 16.1% 11.5% 14.2% 13.4%

Net Gearing (x) 0.5 0.2 0.2 0.3 0.2

Growth ratios

Turnover -6.1% 24.4% 4.2% 35.1% 9.2%

EBIT 13.8% 64.2% -20.8% 36.9% 7.7%

Pretax profit 17.7% 72.5% -21.6% 39.1% 8.0%

Core Net profit 13.7% 77.2% -22.7% 38.2% 8.1%

EPS growth (%) 14.2% 77.0% -22.7% 38.1% 8.1%

Share Price Chart

The Research Team

[email protected] ext 111

Kossans FY11 earnings of RM91.4m is inline with our

expectation. Full year net earnings dipped 22.7% due to the all

time high latex price during first half and stronger MYR against

the USD. FY11 EBIT margin has dropped from 14.9% to 11.3% due

to the abovementioned reasons. Nevertheless, QoQ profit has

shown slight improvement as latex price has since stabilised with

4Q net earnings of RM23.8m is the highest for FY11. As such, we

expect earnings to further improve in the next quarter. We are

maintaining our FY12 and FY13 earnings forecast and target price

remains unchanged RM4.35. Maintain BUY.

Higher contribution from TRP. Technical rubber product division

grew steadily in FY11 with 19.5% and 103% growth in turnover and

PBT respectively; mainly attributed by higher valued infrastructure

products secured by projects.

Stabilised latex price. Most recently, intervention from the Thai

government to support rubber price has propped up natural latex

prices to stay above RM7.00/kg in the short term. Earlier, most

rubber glove buyers around the world have been keeping their

inventory low (2 months compared to their usual inventory level of

about 4 months). This level has been maintained despite latex

price had dropped below RM7/kg as they anticipate further

decline in latex price. Now that a floor price has been determined;

such expectations may no longer hold hence we expect buyers to

increase their inventory level back to their normal level as current

latex price is around its floor level. With this, the demand of

rubber gloves shall return to normal.

Bird flu threat. Recently, the number of bird flu cases has

escalated. In January, Mexico recorded 1,623 cases, including

1,456 H1N1 cases while in New Jersey, there have been more than

300 confirmed cases; and in Vietnam, the Ho Chi Minh City Pasteur

Institute confirmed that a new kind of porcine flu virus, A/H3N1,

has appeared, apparently a combination of the swine-related

A/H1N1 and A/H3N2 flu viruses. Over in Europe, Norway is facing

an outbreak of influenza A, which is caused by a new strain of virus

known as H3N2. France has issued a warning about the H3N2

swine flu. The bird flu threat will have positive impact on our glove

producers as this has been proven in 2009-2010 where most of our

glove players made record high earnings.

No change to our forecast. We are maintaining our FY12 and FY13

earnings forecasts at RM126.3m and RM136m respectively.

However, we will remain vigilant on the latex price trend in the

immediate future. Meanwhile, Kossans financial leverage is

manageable with net gearing of 0.2x supported by strong interest

coverage of 22x.

View & Valuation. Our target price is unchanged at RM4.35 based

on 11x PER over FY12 EPS of 39.5sen. With over 32% potential

upside, we maintain our BUY recommendation on Kossan.

2.00

2.20

2.40

2.60

2.80

3.00

3.20

3.40

3.60

3.80

4.00

Fe b-1 1 Apr-1 1 J un-11 Aug-1 1 Oc t-1 1 De c-1 1
mailto:[email protected]:[email protected]:[email protected]


2/4

27 February 2012 Results Review: Kossan Rubber Industries 4QFY11

www.bimbsec.com.my | 2

Quarterly figuresFYE 31 Dec (RMm) 4QFY10 1QFY11 2QFY11 3QFY11 4QFY11 QoQ YoYChg FY10 FY11 YTD Chg

Revenue 253.0 256.4 275.6 278.5 281.5 1.1% 9.8% 1,047.9 1,092.1 4.2%

EBIT 36.8 30.0 28.5 32.9 32.2 -2.3% 7.4% 156.0 123.6 -20.8%

Pretax profit 34.9 27.9 26.6 31.1 30.5 -2.2% 9.1% 148.1 116.1 -21.6%Taxation (5.5) (4.5) (5.4) (7.1) (6.2) -13.4% 36.3% (29.5) (23.2) -21.4%

Minority Interest (0.2) (0.4) (0.4) (0.4) (0.4) 21.8% 4.2% (0.4) (1.6) 295.5%

Net Profit 29.2 23.0 20.9 23.6 23.8 0.9% 3.9% 118.2 91.4 -22.7%

EPS (sen) 9.1 7.2 6.5 7.4 7.5 0.9% 3.9% 37.0 28.6 -22.7%

Net gearing (x) 0.2 0.1 0.1 0.2 0.2 5.9% 164.1% 0.2 0.2 39.5%

EBIT margin (%) 14.5% 11.7% 10.3% 11.8% 11.4% -3.3% -2.2% 14.9% 11.3% -24.0%

PBT margin (%) 13.8% 10.9% 9.7% 11.2% 10.8% -3.2% -0.6% 14.1% 10.6% -24.7%

Net profit margin (%) 11.6% 9.0% 7.6% 8.5% 8.5% -0.2% -5.4% 11.3% 8.4% -25.8%

Effective tax rate (%) -15.6% -16.2% -20.1% -22.9% -20.2% -11.5% 24.9% -19.9% -19.9% 0.2%

Source: BIMB Securities

Income StatementFYE 31 Dec (RMm) 2009 2010 2011 2012E 2013E

Turnover 842.1 1,047.9 1,092.1 1,476.0 1,612.0

EBIT 95.0 156.0 123.6 169.2 182.3

Pretax profit 85.8 148.1 116.1 161.5 174.4

Net profit 66.7 118.2 91.4 126.3 136.5

EPS (sen) 20.9 37.0 28.6 39.5 42.7

EPS growth (%) 14.2% 77.0% -22.7% 38.1% 8.1%

DPS (sen) 9.0 9.0 9.0 11.0 11.0

NTA/ share (RM) 1.1 1.4 1.5 1.8 2.1

Net gearing (x) 0.5 0.2 0.2 0.3 0.2

PER (x) 17.1 9.6 12.5 9.0 8.4

Div. yield (%) 2.5% 2.5% 2.5% 3.1% 3.1%

P/ NTA (x) 3.2 2.6 2.3 2.0 1.7

EV/ EBITDA (x) 10.3 6.4 7.7 6.2 5.6

ROE (%) 20.3% 29.4% 19.3% 23.2% 21.3%

ROA (%) 9.9% 16.1% 11.5% 14.2% 13.4%


Balance SheetFYE 31 Dec (RMm) 2009 2010 2011 2012E 2013E

Non Current Assets 360.7 410.6 439.1 463.0 482.2

Current Assets 327.9 372.6 373.3 500.1 599.4

Total Assets 688.5 783.2 812.4 963.1 1,081.6

Current Liabilities 260.9 271.8 245.0 309.8 326.0

Non Current Liabilities 68.6 61.9 58.8 58.8 58.8

Shareholders' Fund 357.4 447.4 498.9 590.0 691.4

Minority Interests 1.6 2.0 9.7 4.4 5.4

Equity & Liabilities 688.5 783.2 812.4 963.1 1,081.6



3/4



DEFINITION OF RATINGS

BIMB Securities uses the following rating system:

STOCK RECOMMENDATION

BUY Total return (price appreciation plus dividend yield) is expected to exceed 10% in the next 12 months.

TRADING BUY Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain.

NEUTRAL Share price may fall within the range of +/- 10% over the next 12 months

TAKE PROFIT Target price has been attained. Fundamentals remain intact. Look to accumulate at lower levels.

TRADING SELL Share price may fall by more than 15% in the next 3 months.

SELL Share price may fall by more than 10% over the next 12 months.

NOT RATED Stock is not within regular research coverage.

SECTOR RECOMMENDATION

OVERWEIGHT The Industry as defined by the analysts coverage universe, is expected to outperform the relevant primary market

index over the next 12 months

NEUTRAL The Industry as defined by the analysts coverage universe, is expected to per form in line with the relevant primary

market index over the next 12 months

UNDERWEIGHT The Industry as defined by the analysts coverage universe, is expected to underperform the relevant primary market

index over the next 12 months

Applicability of ratings

The respective analyst maintains a coverage universe of stocks, the list of which may be adjusted according to needs. Investment

ratings are only applicable to the stocks which form part of the coverage universe. Reports on companies which are not part of the

coverage do not carry investment ratings as we do not actively follow developments in these companies.

Disclaimer

The investments discussed or recommended in this report not be suitable for all investors. This report has been prepared for

information purposes only and is not an offer to sell or a solicitation to buy any securities. The directors and employees of BIMB

Securities Sdn Bhd may from time to time have a position in or either the securities mentioned herein. Members of the BIMB Group

and their affiliates may provide services to any company and affiliates of such companies whose securities are mentioned herein. The

information herein was obtained or derived from sources that we believe are reliable, but while all reasonable care has been taken to

ensure that stated facts are accurate and opinions fair and reasonable, we do not represent that it is accurate or complete and it

should not be relied upon as such. No liability can be accepted for any loss that may arise from the use of this report. All opinions and

estimates included in this report constitute our judgements as of this and are subject to change without notice. BIMB Securities Sdn

Bhd accepts no liability for any direct, indirect or consequential loss arising from use of this report.

Published by

BIMB SECURITIES SDN BHD (290163-X)

A Participating Organisation of Bursa Malaysia Securities Berhad

Level 32, Menara Multi Purpose, Capital Square,

No. 8 Jalan Munshi Abdullah,

50100 Kuala Lumpur

Tel: 03-2691 8887, Fax: 03-2691 1262 Kenny Yee

http://www.bimbsec.com.my Head of Research
http://www.bimbsec.com.my/http://www.bimbsec.com.my/http://www.bimbsec.com.my/


4/4



Kossan 4QFY11 Results 20120227

Documents

Transcript of Kossan 4QFY11 Results 20120227