Kossan's net profit increased by 13% q-o-q to RM23.6 million on the back of a marginal 1%-increase in turnover to RM279 million. When compared to the corresponding quarter last year, Kossan's net profit dropped 17% on the back of a marginal 1%-increase in turnover.
Table: Kossan's last 8 quarterly results
Kossan's bottom-line has finally begun to inch up in QE30/9/2011 due to improvement in profit margin.
Chart 1: Kossan's last 21 quarterly results
Chart 2: Kossan's profit margin for last 21 quarterly results
Valuation
Kossan (closed at RM3.07 yesterday) is now trading at a trailing PE of 10 times (based on last 4 quarters' EPS of 30.3 sen). At that PE multiple, Kossan is deemed fairly priced, with 5-10% upside.
Technical Outlook
Kossan may have broken above its downtrend line at RM2.90-3.00. Its immediate resisatnce is at RM3.30.
Chart 3: Kossan's weekly chart as at Nov 18, 2011_11.30am (Source: Quickcharts)
Conclusion
Based on improving financial performance & cautiously positive technical outlook, Kossan could be a good stock for medium-term investment. However, its upside potential may be limited to 5-10% based on the current valuation.
4 comments:
Hi Alex,
The price of rubber/latex seems was increased and the glove stocks losing its uptrend momentum after Malaysia, Indonesia and Thailand authorities planning to setrubber price at min USD3/kg. What do you think?
When monitoring rubber price, TOCOM or Malaysia Rubber Board is prefer? What are the rubber raw mat that is used to make glove (SMR 20, SMR 5, latex in bulk etc)?
We refer to the announcements dated 22 August 2011 and 13 October 2011. All abbreviations used herein shall have the same meaning as those used in the announcement dated 22 August 2011.
On behalf of the Board of Directors of ETHB, HwangDBS Investment Bank Berhad wishes to announce that on 18 November 2011, TYK Capital has sought to extend both the Due Diligence Period and Funding Confirmation Period by a further one hundred and twenty (120) days. TYK Capital has also sought to extend the Conditions Period by three (3) months. ETHB has subsequently on 18 November 2011 agreed to the extensions sought by TYK Capital which shall be effective on 20 November 2011.
The extension of time is to provide TYK Capital’s financiers with more time to complete the Due Diligence in view of the floods in Ayutthaya, Thailand which has restricted access to the manufacturing facilities of both Engtek (Thailand) Co., Ltd. and Altum Precision Co., Ltd., thus hampering the progress of the Due Diligence exercise.
The flood situation has yet to improve to allow an accurate assessment of damages to be made. Both ETHB and TYK Capital will be working together to assess the impact of the floods on the financial position and prospects of the ETHB Group and how the terms and conditions and/or the viability of the Proposals may be affected once the situation permits.
This announcement is dated 18 November 2011.
Any comment,I still kept my Eng at price Rm 1.56
Hi chanhoo
I think the glove makers can live with rubber price at min USD3/kg. I do not have any preference of using TOCOM or Malaysia Rubber Board. I use TOCOM as a proxy because I don't have accessed to actual price of rubber latex.
Hi chuaguanhong
Thank for the info. I have nothing to add to that. I have expected it and I would be surprised if TYK Capital were to revise its offer price for ENG to a lower price, say RM2.00.
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