KUALA LUMPUR (May 27): PublicInvest Research has upgraded Kossan Rubber Industries Bhd to “Trading Buy” at RM3.82 with a higher target price (TP) of RM4.30 (from RM3.50) and said Kossan reported a better set of results for 1QFY19, with a 31.9% year-on-year (y-o-y) increase in net profit to RM58.7 million.
In a note today, the research house said the results were broadly in line with house and street’s estimates, at 26.7% and 24.9% respectively.
“In our universe of coverage, only Kossan has managed to deliver a satisfactory and positive quarterly performance.
“All segments of Kossan posted stronger earnings in 1QFY19. TRP division’s profit before tax (PBT) was up 35% y-o-y, gloves segment’s PBT up 43% y-o-y and cleanroom segment’s PBT up 38% y-o-y.
“Rolling forward our valuation to FY20F, we raise our TP to RM4.30 (from previous TP of RM3.50), based on an unchanged PE multiple of 21x.
“Given an upside potential of 13%, we upgrade Kossan to Trading Buy instead of an outright buy as we are not expecting its Bidor integrated plant to generate meaningful earnings in the near term, perhaps only in FY22F,” it said.