Karex Berhad

$KAREX / 5247 (KAREX BERHAD)
Research by KENANGA

$KAREX / 5247 (KAREX BERHAD)
Research by APEX

$KAREX / 5247 (KAREX BERHAD)
Research by RHB

$KAREX / 5247 (KAREX BERHAD)
Research by APEX
BUY – TP RM 1.10

" A Pleasure and Safety Investment”
• One of the world’s largest condom manufacturer, commanding c.20% global market share in 2023 with production capability of c.5.5bn pieces that is supported by strong in-house Research and Development (R&D) capabilities tailored to various demand and specifications.
• Revenue is forecasted to expand 1.1% yoy and 9.5% yoy to RM513.5m and RM562.2m in FY25F and FY26F respectively, driven by (i) strategic growth initiatives through focusing onto high-margin products within commercial and Original Brand Manufacturing (OBM) divisions, (ii) rising global population, (iii) increasing healthcare awareness and (iv) venture into new synthetic condom market which is expected to be more cost competitive thereby could bolster margins.
• Karex is derived based on FY26F core EPS of 4.2 sen pegged to PE of 26.0x, leading to a FV of RM1.10 (+32.5% potential upside from current price)

Analyst:
Chelsea Chew
chelsea.chew@apexsecurities.com.my

$KAREX / 5247 (KAREX BERHAD)
Research by APEX
BUY – TP RM 1.11

" A Pleasure and Safety Investment”

• One of the world largest condom manufacturer, commanding c.20% global market share in 2023 with production capability of c.5.5bn pieces that is supported by strong in-house Research and Development (R&D) capabilities tailored to various demand and specifications.
• Revenue is forecasted to expand 10.5% yoy and 7.6% yoy to RM568.5m and RM611.9m in FY25F and FY26F respectively, driven by (i) strategic growth initiatives through focusing onto high-margin products within commercial and Original Brand Manufacturing (OBM) divisions, (ii) rising global population, (iii) increasing healthcare awareness and (iv) venture into new synthetic condom market which is expected to be more cost competitive thereby could bolster margins.
• Karex is derived based on FY26F core EPS of 4.2 sen pegged to PE of 26.5x, leading to a FV of RM1.11 (+37.0% potential upside from current price).

Analyst:
Chelsea Chew
chelsea.chew@apexsecurities.com.my

$KAREX / 5247 (KAREX BERHAD)
Research by Kenanga
OUTPERFORM – TP RM1.12

"Received FDA Approval”

KAREX has received approval from the United States Federal Drug Agency (FDA) to market its new synthetic condoms in the country, in quick succession after the European CE approval. This latest development significantly enhances KAREX’s growth potential,though large orders are more likely to come through in FY26 and beyond as the product gains traction. We maintain our forecasts, TP of RM1.12 and OUTPERFORM call.

Analyst:
Cheow Ming Liang
cheowml@kenanga.com.my

$KAREX / 5247 (KAREX BERHAD)
Research by Kenanga
OUTPERFORM – TP RM1.12

" Doubling Profit with Strong Margins”

KAREX’s FY24 results and dividends exceeded our forecast, with net profit more than doubling, driven by strong margins on improved product mix. Its outlook remains positive, supported by the roll-out of high-margin synthetic products and increased contributions from personal lubricant. We lowered our FY25F net profit by 5% amid reduced exposure from the tender market, and gestation period for new products. Introducing our FY26 forecasts, we raised our TP by 2% from RM1.10 to RM1.12 (on calendarized FY25 earnings) and maintain our OUTPERFORM call.

Analyst:
Cheow Ming Liang
cheowml@kenanga.com

$KAREX / 5247 (KAREX BERHAD)
Research by Kenanga
Outperform – TP RM1.10

“Favourable Products Mix"

KAREX is expected to meet our RM25m net profit target for FY24, driven by strong sales in high-margin personal lubricants and a strategic shift to higher-margin segments. Furthermore, it is set to deliver its first synthetic condom order in November, which holds promise for significant growth, which we think sufficiently offsets concern on earnings drag from its underutilized glove segment. We keep our forecasts, TP of RM1.10 and OUTPERFORM call.

Analyst:
Cheow Ming Liang
cheowml@kenanga.com.my

$KAREX / 5247 (KAREX BERHAD)
Research by Kenanga
Outperform – TP of MYR 1.10

“A Euro 2024 Win with Synthetic Condom”

We understand that KAREX has received CE certification for its new synthetic condoms which allows it to market the product in Europe. The latest development has significantly enhanced KAREX’s growth potential, though large orders are more likely to come through in FY26 and beyond. We maintain our forecasts, TP of RM1.10 and OUTPERFORM call.

Analyst(s):
Cheow Ming Liang
cheowml@kenanga.com.my

KENANGA 2H 2024 TOP PICKS SMALL CAP

$OPPSTAR / 0275 (OPPSTAR BERHAD) $KAREX / 5247 (KAREX BERHAD) $TGUAN / 7034 (THONG GUAN INDUSTRIES BERHAD) $MKH / 6114 (MKH BERHAD) $ENGTEX / 5056 (ENGTEX GROUP BERHAD)

Karex Bhd’s earnings growth will likely continue to be robust, sustained by strong margins.

$KAREX / 5247 (KAREX BERHAD)
Research by Kenanga
Outperform – TP of MYR 1.10

“Earnings Driven by Margin Expansion”

KAREX’s 9MFY24 results beat our forecast. Its 9MFY24 net profit almost tripled driven by strong margins on an improved product mix. Its outlook will be buoyed by the roll-out of high-margin synthetic products. We raise our FY24-25F net profit forecasts by 5% and 4%, respectively, lift our TP by 4% to RM1.10 (from RM1.06) and maintain our OUTPERFORM call.

Analyst(s):
Cheow Ming Liang
cheowml@kenanga.com

KAREX - Notice of Book Closure

Quarterly rpt on consolidated results for the financial period ended 31/03/2024

Interim Dividend

Today, RHB IB launched their highly anticipated RHB Small Cap Top 20 Jewels 2024 Edition together with their 20th anniversary. Happy to be invited to attend their launch ceremony at RHB centre and have the honour of sitting at the front row.

Without further ado, here are some footages as well as highlights and summary of their 2023 picks and 2024 picks. They also cover Singapore, Indonesia and Thailand markets as well, but in this post I will focus mainly on their Malaysia market picks.

To outline the definition of small cap here, they are PLCs that are less than 500mil USD market capitalisation. Screening methodology based on 3 broad criterias: Quantitative, Qualitative and Thematic trends.

So, how did the Malaysia market picks for 2023 edition performed:
Top 20 Malaysia Small Cap Jewels 2023 outperformed the broad market, delivering a holding period return of 46.4% v.s. FBM KLCI’s and FBM SC’s returns of 13.0% and 21.4%.

The best performing picks last year was $MCEHLDG / 7004 (MCE HOLDINGS BERHAD), which they also included in the 2024 Jewels actually, and is the only one that is brought forward! Following closely is $VSTECS / 5162 (VSTECS BERHAD), and then $UZMA / 7250 (UZMA BERHAD), WASEONG (now known as WASCO), PIE, LEESK.

Now, moving forward, for 2024 edition:
Their picks are at an average market capitalisation of MYR545m and ROE of 11.2%. Spanning 9 diverse sectors, names from the industrial products & services, technology, construction, consumer products & services sectors make up 70% of their picks. Out of the 20 listed, only 4 are listed on Main Market, the rest are in the Ace Market.

Auto & Autoparts – NHFATT
Basic Materials – PA
Construction – INTA, KIMLUN, MUHIBAH
Consumer Products & Services – ABLEGLOB, KAREX, SHANG
Healthcare – UMC
Industrial Products & Services – AWC, ENGTEX, MCEHLDG, SCOMNET, YBS
O&G – DELEUM
Real Estate – AVALAND
Tech – CLOUDPT, OPPSTAR, QES, TTVHB

Once again, thanks for having me @rhbtradesmartmy . Looking forward to seeing how the Top 20 Jewels 2024 will perform this year, and of course I’ll be tuning into the upcoming 2 PLCs’ management livestreams with $CLOUDPT / 0277 (CLOUDPOINT TECHNOLOGY BERHAD) and $KAREX / 5247 (KAREX BERHAD) this Saturday!

Here's the link for those who want to register for the session this Saturday: https://cutt.ly/cee86tai

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Intention to Deal During Closed Period

DEALINGS IN LISTED SECURITIES (CHAPTER 14 OF LISTING REQUIREMENTS) : Dealings Outside Closed Period

Changes in Director's Interest (Section 219 of CA 2016) - DATO' SIEW MUN WAI (EDWARD)

Karex Bhd is in a good position to beef up its earnings going forward, partly due to a new high-margin product expected to be launched in its financial year 2025 (FY25).

$KAREX / 5247 (KAREX BERHAD)
Research by Kenanga
Outperform – TP of RM1.06

“A Postcard from Hat Yai”

We visited KAREX’s plant in Hat Yai, Thailand, which has access to labour and input latex at lower costs and enjoys attractive investment allowances and a lower corporate tax, as compared to its three plants in Malaysia. KAREX’s plan to put onto the market a new product, i.e. synthetic condoms, is on track. We maintain our forecasts, TP of RM1.06 and OUTPERFORM call.

Analyst(s):
Cheow Ming Liang
cheowml@kenanga.com.my

$KAREX / 5247 (KAREX BERHAD)
Research by Kenanga
Outperform -TP of RM1.06

"Key Focus on Margins and Innovation"

KAREX guided for its gross profit margin to sustain at between 30% and 35%, driven by a favourable product mix, stable input cost and the introduction of a high-margin new product, i.e. synthetic condoms. The new product will also enhance KAREX's competitiveness in terms of wider product offerings. We maintain our forecasts, TP of RM1.06 and OUTPERFORM call.

Analyst(s):
Cheow Ming Liang
cheowml@kenanga.com.my

$KAREX / 5247 (KAREX BERHAD)
Research by Kenanga
Outperform - Tp of RM1.06

"Playing the Margin Card"

KAREX’s 1HFY24 results beat expectations with record margins, driven by a favourable product mix. It is riding on higher-margin products on a positive global condom demand growth trajectory. We raise our FY24-25F net profit forecasts by 6% each, lift our TP by 6% to RM1.06 (from RM1.00) and maintain our OUTPERFORM call.

Analyst(s):
Cheow Ming Liang
cheowml@kenanga.com

Quarterly rpt on consolidated results for the financial period ended 31/12/2023

PETALING JAYA: Karex Bhd is poised for a good year ahead, capitalising on the rising global demand for condoms that is expected to grow at a compounded annual growth rate (CAGR) of 8% to 9% over the next 10 years.

$KAREX / 5247 (KAREX BERHAD)
Research by Kenanga
Outperform - TP of RM1.00

"It Pays to Play Safe"

KAREX is riding on the strong growth in the condom industry, focusing on high-margin products which will take its profitability to a higher level. It is penetrating high-growth markets with premium offerings backed by innovation and strict compliance with
international standards. We project its earnings to double in FY24, followed by another 88% surge in FY25. We initial coverage on KAREX with an OUTPERFORM rating and a TP of RM1.00.

Analyst:
Cheow Ming Liang
Cheowml@kenanga.com.my

Change of Address

Change of Company Secretary - CHOONG SIEW MUN

Change of Company Secretary - TAI YIT CHAN

Change of Company Secretary - LIM LEE KUAN