Kenanga Research maintains Outperform on Kossan KUALA LUMPUR: Kenanga Research has maintained its Outperform rating on Kossan with a raised target price ti RM5.23 from RM4.86 based on unchanged 16 times FY15E revised earnings per share. In a note on Wednesday, the research house said it is raising its FY15E earnings forecast by 8% taking into account margin expansion emanating from the new plant’s production scheduling strategy and introducing our FY16E numbers. We like Kossan because of its superior net profit growth of 16% and 28% in FY14E and FY15E, compared to peers average of 10%-12%, respectively, the unprecedented earnings growth over the next two years underpinned by rapid capacity expansion, and the fact that Kossan is not just a rubber glove play but also a bet on its technical rubber products division, which has grown steadily over the past few quarters, it said. Kenanga believes that Kossans new gloves production lines could potentially lead to higher margins due to improved productivity and efficiency as the lines are designed to focus on larger orders with fewer clients, compared to previous production scheduling model for a single product type and specification. Therefore, reducing idle downtime from frequent machinery setting adjustments to accommodate diverse specifications. This could lead to an output of 35,000 pieces of gloves per hour, which is higher than its existing average production line speed of 29,000 gloves per hour; a robust 20% enhancement, it said. Kenanga said Kossans current production style comprises shorter production lines catering to a large customer base with diverse products, which reduces reliance risk on few larger clients. However, such an arrangement limits margin expansion due to more downtime on frequent machinery setting adjustment, it noted. | #saham | #kossan |
Posted on: Thu, 09 Oct 2014 01:17:43 +0000
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