Saturday 30 Nov 2024
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This article first appeared in The Edge Financial Daily, on February 26, 2016.

 

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KUALA LUMPUR: Kossan Rubber Industries Bhd has seen a near 46% rise in earnings in the fourth quarter ended Dec 31, 2015 (4QFY15), but its shares fell as much as 26 sen or 3.9% yesterday as investors appeared largely unaffected by its improved financial performance.

The stock pared some of its losses to close at RM6.59 yesterday, still down 16 sen or 2.37%, compared with Wednesday’s closing. The current price gives it a market capitalisation of RM4.21 billion.

Kossan is the second rubber glove maker that appears to have failed to excite investors despite having posted a jump in earnings.

Hartalega Holdings Bhd announced a 47% jump in its net profit for the three months ended Dec 31, 2015 last week, but the news did not seem to be able to halt a continued decline in its share price since early January. Hartalega slipped two sen or 0.41% to close at RM4.85 yesterday, with a market capitalisation of RM7.96 billion.

Nevertheless, four research houses have upgraded their calls on Kossan, saying its earnings prospects remain positive and appear to be attractive following the recent share price correction among glove makers’ counters.

Aside from a stronger ringgit, another analyst said the sharp fall in Kossan’s share price of late — having lost some 30% in its share price since Dec 22 last year — could also be due to the recent oil price recovery.

Compared with its share price of RM9.50 as at Dec 22 last year — an all-time high that was reached amid a strong US dollar and lower raw material prices — Kossan has since lost as much as RM2.91 in its share price or some RM1.8 billion in market capitalisation. Year to date, the stock has lost about 29%, which, to some analysts, has made Kossan more attractive compared with its peers.

“Kossan is currently trading at an undemanding 19 times its price-earnings ratio and the valuations appear compelling. Further, its dividend yield has remained palatable at about 3%,” one analyst added.

However, another analyst believes the current share price has largely priced in the near-term earnings prospects of Kossan, hence there is little to limited upside potential left.

It is worth pointing out that Kossan is developing 56 acres (23ha) of land in the Klang Valley as part of its four-year expansion drive, which is scheduled to increase its production capacity to 44 billion pieces by 2020 from 22 billion last year.

On Tuesday, Kossan announced its 4QFY15 net profit surged 45.56% year-on-year to RM55.21 million from RM37.93 million, on higher contributions from its divisions due to higher sales and lower overheads. Its quarterly revenue also went up 21.66% to RM439.16 million from RM360.96 million last year.

For the full FY15, its net profit grew 39.6% to RM203.26 million from RM145.6 million in FY14, as revenue gained 26.15% to RM1.64 billion from RM1.3 billion.

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