For QE30/6/2018, Kossan's profit before tax rose 4% q-o-q on the back of a 3%-increase iin revenue to RM497 million. When compared to the same quarter last year, profit before tax dropped 2% while revenue increased by 1%.. The improved q-o-q performance was mainly attributable to the improved performance in the Technical Rubber division. How did the Gloves division perform?
Table 2: Kossan's last 8 quarterly results
Table 2: Kossan's segmental performance for 1Q2018 & 2Q2018
Kossan's top-line, bottom-line and profit margin have been moving sideways for the past 4-5 quarters.
Chart: Kossan's last 48 quarterly results
Kossan (closed at RM4.43 last friday) is now trading at a PE of 31.6 times (based on last 4 quarters' EPS of 14.04 sen). At this PER, Kossan is deemed fully valued.
In late July, Kossan surpassed its December 2015 high of RM4.61 when it made a new all-time high of RM4.72. This failed breakout could be a set-up for a reversal. Be careful!
Chart 1: Kossan's monthly chart as at Aug 17, 2018 (Source: ShareInvestor.com)
Chart 2: Kossan's weekly chart as at Aug 17, 2018 (Source: ShareInvestor.com)
Kossan's relatively healthy financial performance belied its weakened position in the glove industry. Notwithstanding the under-performance, Kossan share price was able to make a new all-time high momentarily- probably induced by a share split exercise that was completed in July. I believe this situation cannot persist for long, and the likely outcome would be a price rollback. Thus, I revised my rating for Kossan from a BUY to a SELL.
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