KUALA LUMPUR (Feb 19): RHB Research Institute Sdn Bhd has upgraded Kossan Rubber Industries Bhd to “Buy’ at RM4 with a target price of RM4.45 and said its target price (TP) implies FY19F P/E of 22.3x or 0.2SD above the company’s average forward P/E valuation in the past three years.
In a results preview today, the research house said the higher TP is due to valuation rollover in our DCF to begin with FY19F. Kossan’s FY18 core NP of RM201 million (+10% YoY) was in line.
“We believe investors should accumulate Kossan after its share price decline of 7.8% YTD (against the FBM KLCI’s 0.2% increase) despite its good 2019 core NP growth estimate of 27% (vs the FBM KLCI’s 3%).
“Although net gearing has increased to 28% as of end-FY18, it remains manageable at below the 50% threshold,” it said.