Kossan: Only marginally higher top-line & bottom-line

Result Update

For QE30/6/2015, Kossan's net profit increased 4% q-o-q or 37% y-o-y to RM47 million while revenue increased 4% q-o-q or 27% y-o-y to RM386 million. Profits & revenue inched up q-o-q due mainly to better performance by the Technical Rubber & Clean-room divisions. The Gloves division only experienced slight upticks in revenue & profits. However, in June, Kossan commenced operation in its Plant 3. This plant will increase its capacity by 11% from 18 billion pieces per year to 20 billion pieces per year. Going forward, Kossan's top-line & bottom-line should be adjusted higher in line with this increased capacity.


Table: Kossan's last 8 quarterly results

Kossan's top-line, bottom-line and profit margin are in uptrend.


Chart 1: Kossan's last 36 quarterly results

Valuation

Kossan (closed at RM7.21 yesterday) is now trading at a PE of 28 times (based on last 4 quarters' EPS of 25.8 sen). At this PER, Kossan is deemed fully valued.

Technical Outlook

Kossan is in a long-term uptrend. There is no sign of technical weakness in the indicators.


Chart 2: Kossan's weekly chart as at Aug 20, 2015 (Source: ShareInvestor.com)

Conclusion

Based on improved financial performance & positive technical outlook, Kossan is a good stock for long-term investment. However, its demanding valuation could cap its upside potential.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Kossan.