Kossan: Earnings Improved y-o-y

Result Update

For QE31/3/2019, Kossan's net profit declined 1% q-o-q but rose 30% to RM59 million while revenue dropped 5% q-o-q but rose 16% y-o-y to RM561 million.

Group’s revenue dropped 5% q-o-q to RM561 million while profit before tax (PBT) rose 5% q-o-q to RM75.08 million. The higher PBT was attributable to the improved earnings of the Gloves division. The Gloves division recorded a 4.3%-decline in revenue q-o-q to RM497 million but its PBT rose 8.7% to RM68 million due to continued strong demand for the Group’s glove products, with higher volume sold (+4.68%) as compared with 4Q18.

The TRPs division recorded a 7%-decline in revenue to RM47 million, while PBT decreased 19%  to RM7 million mainly due to lower deliveries and increase in raw material prices (SMR10 +8.16%). The Cleanroom division recorded lower revenue and lower PBT of RM17 million and RM0.6 million respectively in 1Q19, as compared with RM19 million and RM1.1 million in 4Q18.


Table: Kossan's last 8 quarterly results

Graph: Kossan's last 51 quarterly results

Financial Position

Kossan's financial position as at 31/3/2019 is deemed healthy with current ratio at 1.7 times while gearing ratio was at 0.6 time.

Valuation

Kossan (closed at RM3.82 last Friday) is now trading at a PE of 22.6 times (based on last 4 quarters' EPS of 16.9 sen). At this PER, Kossan is deemed fairly valued.

Technical Outlook

Kossan is in a long-term uptrend line, SS with support at RM3.65. In addition, it is trading very close to its 40-month SMA line (about equivalent to the 200-day SMA line). Its immediate resistance is the psychological RM4.00 mark.


Chart: Kossan's monthly chart as at May 24, 2019 (Source: Malaysiastock.biz)

Conclusion

Based on good financial performance and financial position, fair valuation & positive technical outlook, Kossan is a good stock for long-term investment.

Note: 

I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post. However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.