KUALA LUMPUR (Jan 27): Shares in Karex Bhd rose as much as 15 sen or 3.7% in the morning session today, after the country's biggest condom maker announced that it was acquiring TheyFit LLC assets for US$1.3 million (RM5.64 million).

The stock hit an intraday high of RM4.24, before closing the morning session at RM4.23, up 14 sen or 3.42%, with 888,200 shares traded. The current price gives it a market capitalisation of RM2.76 billion. It was the seventh top gainer on Bursa Malaysia in morning trade. 

In a filing with Bursa yesterday, Karex said its wholly-owned unit Karex Holdings Sdn Bhd had signed an asset purchase agreement with TheyFit, Dr Michael Cecil and Joseph Nelson for the proposed acquisition of TheyFit's assets.

TheyFit owns the patents, trade names and trademarks for condoms manufactured, marketed and sold under the TheyFit's brand in key markets such as the United Kingdom and Europe.

Karex said the proposed acquisition is part of its own brand manufacturing (OBM) expansion plan.

In a note to clients today, Hong Leong Investment Bank (HLIB) Research said it is positive on the acquisition as it will enable Karex to complement and expand its existing own brand products family.

"The acquisition will also allow Karex to develop future brands or undertake rebalancing in various custom fit sizes of condoms. Together with the Food and Drug Administration (FDA) approvals, Karex will be able to market new custom fit condoms to the United States and global markets to further expand its market share," it noted. 

According to HLIB Research, the acquisition only represents 2.6% of Karex's financial year 2016 (FY16) net cash of RM214.73 million.

"Balance sheet remains healthy as post acquisition net cash per share is still high at 31 sen or equivalent to 7.6% of its share price," it said. 

HLIB Research has a "hold" call on Karex, with an unchanged target price of RM4.52. 

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)