Kossan Rubber Industries Berhad

Sharing from remisier

$HARTA / 5168 (HARTALEGA HOLDINGS BERHAD)
$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
$TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD)

*Gloves Sector Flash Update 🧤

- *Two weeks after soft guidance by Harta’s management* in its results briefing, *Malaysian glove companies 🇲🇾* have seen share price declining by 30-40%.

- *Retain our view* that recent selldown is overly pessimistic, and *deep value has emerged* following such drastic retracement.

- *Rating📈.* We’ve previously advocated investors to monitor for inflection point and consider *positioning once the selldown stabilises🌊.* We believe near-term share prices may have bottomed throughout this two weeks’ *price discovery.*

- *Maintain BUY on:* Harta (RM2.16/TP:RM3.14); TOPG (RM0.88/TP:RM1.31); Kossan (RM1.80/TP:RM2.52).

- *Valuations in bargain📊.* Gloves companies under our coverage are now trading at *-1SD below mean PE* on 2026F earnings. Note that sector has been trading between +0.5SD/+1SD throughout 2023-24.

- *Full impact from US order shifts are not reflected yet🇺🇸.* Sept-Dec 24 (4Q24) results are already commendable, but note that US distributors frontloaded purchase from China producers that run double shifts to rush orders before tariffs. This is evidenced from the monthly US gloves import chart flows in 2024.

- *Against 1Q25's softening results🥊,* 2Q25 will see good pick up as US' purchase recover significantly (higher than 4Q24's orders as US distributors will not be able to buy from China anymore).

- *Further analysing US distributor's inventory levels📦.* If US annual normalised gloves consumption c.65b pcs, overstocked inventories in 4Q24 may be only c.7b pieces. This translates to c.1.5 months of excess inventory. Adding back normal inventories level of 1-2months, potential inventory levels at c.2.5-3months.

• *Malaysia production capacity is c.150b 🏭* (big 4 glovemakers) and running at *U-rate of c.60%* averagely (3Q24; before surging order due to US kicks in). If we assume: *i)* US completely stop purchasing from China beginning 2025; *ii)* 30b existing China exports fully flows to MY glovemakers, indicative U-rate shall recover to *c.80% in phases.*

- *Challenging outlook in Europe is not something new🇪🇺,* we've highlighted in our earlier reports that competition in the region will be intensified after US' revised tariffs to China gloves. This however, may be compensated by surging US sales and better margin.

• *China ASP not as low as expected 🔻.* Analysing several invoices of few China glovemakers, Dec 24's ASP for *nitrile gloves* is US$17.30 vs June's US$16. *Latex gloves'* ASP in Dec is US$20.70 vs June's US$19.80. *PVC gloves* Dec US$17.30 vs June's US$15.90.

• *Recall that China glovemakers only turnaround into operational profit in 1Q-2Q24♻️,* which indicates potential breakeven ASP closer to US$16. Note that such breakeven points are when their utilisation rate >90%. With the loss of US market share, U-rate will decline and breakeven cost will rise.

- *Local glovemakers' global market share🌎* for medical gloves is highest at *c.40-55%.* Over past two decades, its been proven that *gloves demand will surge during viral infections😷:* H1N1 (2010), MERS (2012), Ebola (2014), 2020 (COVID-19) are case-studies, so are valuations.

• *About fund flows🚰 .* Malaysia Big 4 glovemakers have combined *market cap of c.RM22b* currently. Excluding family/direct ownership from major shareholders, floating shares are at *c.RM10-11b.* This excludes all institutional holdings.

• *Risk reward is attractive at this level🍀 .* As such, we think that once sellers exhaust, sector offers good trading opportunities. Sector have seen multiple rounds of liquidity squeeze when positive newsflow emerge, surging within c.40-70% trading range in recent two years. *Entry point🚪 :* after selldown stabilises.

Sharing from remisier.

Glove back?

$HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) $KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD)

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*Gloves Sector Flash Update 🧤

- *Thailand’s 🇹🇭 Public Health Ministry* has warned that the incidence of influenza is spreading rapidly, with four provinces in the northeast region the hardest hit.

- *There has been a big jump in infections in February.* According to the Thai health ministry, 7,819 cases of influenza were reported in Jan, but by 15th Feb, total infections this year had leapt to 99,057, with nine fatalities. The ministry also said that *H1N1🦠 is the main virus strain* active in Thailand at present.

- *These concerns😷* on raising influenza cases are again *lifting sector sentiment,* despite unlikely to evolve into a COVID-19 like pandemic.

- *Coupled with confluence of catalysts🌟* such as: *i)* US’ higher tariffs on China gloves; *ii)* improving earnings and operating matrixes; and *iii)* lack of visible thematic catalysts across other sectors, we *do not rule out possibilities* of Malaysian gloves sector *re-rating back to +1SD above mean valuations range.*

- *We are still maintaining our valuation methodology and TP for now, pending further monitoring ⚖️.* Our current TPs: Kossan (RM2.24/TP:RM2.65); Harta (RM3.31/TP:RM3.66); and Top Glove (RM1.20/TP:RM1.31) are *based on +0.5SD above mean on 2025F PE* and may re-rate to +1SD if such sentiment continues to build up.

- *Expect slight positive share price movement📈* across domestic gloves name, but should still *trade range-bound towards our +0.5SD valuations range* unless participation of strong fund flows.

- Harta will also be releasing its 3QFY25 results today.

Sharing from remisier. Glove is back?

*Gloves Sector Flash Update 🧤

🔹 *Trump impose 10% additional tariffs on China imported goods,*⚖️ after signing an executive order on Saturday. Including earlier tariff modification by USTR, China’s medical gloves likely faces higher tariff of 60% in Feb 2025 and 110% in 2026 (from current 50%; initially proposed 100% in 2026).

🔸 *China manufacturers no longer competitive in US market🇨🇳.* Assuming China’s breakeven ASP of US$14.5-15, adding in a 60% tariff will result in US ASP of US$23-24. Given that such tariffs will further revised to >100% in 2026 and considering supply chain consistency, US distributors/hospitals will likely stop purchasing from China, resulting in altering industry landscape which benefit MY glovemakers.

🔹 *Concerns on Trump’s proposed universal tariffs policy also have limited impact 🌍.* While there’s lingering uncertainty that Trump may introduce global tariffs of 10-20% across all imports to the US, MY glove-makers shall also be shielded. Factoring in the existing 60-110% US tariffs imposed on China medical gloves in 2025-26, the pricing gap between Malaysia and China producers for US exports is still wide.

🔸 *In terms of rough US market exposure🇺🇸:* i) Harta leads with >50% of total sales; ii) Kossan c.40%; iii) Top Glove c.20%; iv) Supermax c.29% historically. Such figures will see meaningful surge in coming quarters.

🔹 *Sector valuations palatable after ytd retracement.* We’ve downgraded the sector to Market Weight since early Jan 2025, citing “overhyped optimism” after domestic glovemakers’ share prices surged by 46-53% in 2024 (contrarian overweight rating since 2023). While MY glove stocks’ subsequently *retraced 11-20% last few weeks,* current valuations provide trading opportunities.

🔸 *Stock ratings💡.* Officially, we have a HOLD rating on Top Glove, Kossan and Hartalega after early-Jan’s downgrade. Nevertheless, *Kossan* (RM2.24/TP:RM2.65); *Harta* (RM3.31/TP:RM3.66); and *Top Glove* (RM1.20/TP:RM1.31) now trades at good entry level and *poses commendable capital alpha with limited beta* towards AI/DC or further US tariffs newsflow.

$TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) $KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research Reports by RHB

We can see a number of cash rich companies announcing special dividends. This may, or may not, be due to the dividend tax coming into play next year. For example:

$KMLOONG / 5027 (KIM LOONG RESOURCES BERHAD) and $UTDPLT / 2089 (UNITED PLANTATIONS BERHAD) (have been declaring special dividends for many years already)
$LYSAGHT / 9199 (LYSAGHT GALVANIZED STEEL BERHAD) as discussed by @benghooi and @realalvinang before
$MSC / 5916 (MALAYSIA SMELTING CORPORATION BERHAD) with a substantial 17 sen special dividend for the first time in over a decade
$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) also declares a special dividend
Pecca, Hexza, TMCLIFE, hupseng, far east and more.

What are some similarities of these few companies declaring these dividends? Some are record high, some are highest in a few years-- are these dividends coming from improved business operations, or appropriation of cash in the balance sheet that is expected not to be utilised in the near future?

Which other companies could potentially give a surprise bumper dividend before the year ends?
Many listed companies in Bursa are cash rich (or even cash hoarding, some might say); could there be any other which could be compelled to issue dividends soon?

Of course, as usual, due diligence is required and it's typically not a good idea to be fixated on just this singular facet (of special dividends due to the upcoming dividend tax). But it's something to think about. After all, if a major shareholder was to receive the money from the business they have been handling for years; now would be as good a time as any.

$SGX-AP4 RIVERSTONE

As we close in to the 5 years of Covid boom and bust of the glove sector, this is still the only rubber glove company I know in the world, that came out of it without recording a single financial loss in a quarter.

And listening into their latest QR briefing, they're not stopping on YoY earnings growth.

I believe besides $HARTA / 5168 (HARTALEGA HOLDINGS BERHAD), RIVERSTONE will be exposed more than other glovemakers to US client demands. $KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD)

In the briefing, management mentioned that healthcare glove volume had increased 30% QoQ, with the driver being the tariff in US made some clients moved back and gave order. And the best thing is that ASP for US clients can and had been increased.

Management believe that US market will contribute 70% to overall business next year, up from 40% contribution this year.

Looking forward to more yummy dividends and earnings growth in 2025!

@zhexiangxd @CalmSage @terence775

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by TA

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by HLIB

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by RHB

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by PublicInvest

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by Maybank

Titan Trading Notes For Thursday [7/11/2024]:

$KLCI was able to rebound back towards the 1634 points region with an overall bullish market sentiment today as President Trump won the elections. Daily trading volume soared back towards the 3.3 billion mark, which is a pretty decent sign here.

Main stocks that showed strong buying momentum would be the likes of 3REN, GENETEC, CEB, TOPGLOV, MYEG, JCY, GTRONIC, VS, CREST, BAHVEST, YTL, NICE, VTC, NOTION, AIMFLEX, CAREPLS, EKOVEST, INARI, PERTAMA, JPG, NATGATE, CYPARK, SUNWAY, 99SMART, and SNS. All of which were able to sustain their rallies throughout the day on the top volumes list.

Market today was flying in general, running multiple themes at once, with technology leading the way, followed by the healthcare and construction sectors.

$GENETEC / 0104 (GENETEC TECHNOLOGY BERHAD) since retracing all the way towards the RM 0.68+ support levels yesterday, was definitely the main star performer for today as it broke out and rallied all the way towards the RM 0.95 regions with huge volume and buying momentum.

This rally was most likely fueled by President Donald Trump's win in the elections today as GENETEC supplies parts to TESLA, who's owner Elon Musk is a huge supporter of Donald Trump.

I doubt GENETEC's earnings will see improvements in the near future just because of this, so just be more cautious when trading it on a breakout. Will definitely be monitoring GENETEC as Trump-Elon related stocks have been surging quite high worldwide.

$NOTION / 0083 (NOTION VTEC BERHAD) n the other hand also had a huge breakout from its RM 0.96+ main downtrend resistance levels on the daily chart, rallying all the way towards the RM 1.10+ regions today with huge volume.

This came after consolidating over the past few months with RM 0.85+ as the main support levels. For now looking quite strong here and as long as able to hold above its RM 1.04+ support, could continue on towards and beyond the RM 1.20 major resistance levels soon.

That said, we do have to factor in that this week will likely see QR releases for NOTION. I expect to see some forex losses as the Ringgit had strengthened too much from the USD over the past few months, so will likely reflect on Q4 2024. Have to factor this in when trading it.

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) since breaking out from its RM 2.15+ main downtrend resistance levels yesterday, had been able to sustain the buying momentum and broke out all the way towards the RM 2.30++ regions with huge volume and buying momentum today.

So far looking quite strong here and as long as able to hold above its RM 2.20+ immediate support levels on the daily chart, could continue on towards and beyond the RM 2.40+ major resistance levels soon.

Titan Trading Notes For Monday [4/11/2024]:

$KLCI rebounded slightly back towards the 1603 points region with an overall mixed market sentiment during last Friday as we still saw over 540 counters closing red for the day. Daily trading volume remains low around the 2.1 billion mark, which isn't a good sight.

Main stocks that showed strong buying momentum would be the likes of ELRIDGE, JPG, PBBANK, VS, NE, TANCO, TDM, SIME, PERDANA, and YTLPOWR. All of which were able to sustain their rallies throughout the day on the top volumes list.

$ELRIDGE / 0318 (ELRIDGE ENERGY HOLDINGS BERHAD) was definitely one of the best performers for last Friday as it was able to breakout strong from its RM 0.445 major resistance levels and rallied all the way towards the RM 0.48 regions, forming a new all time high with good volume and buying momentum.

For now looking very strong here and as long as able to hold above its RM 0.455+ immediate support levels, could continue on towards and beyond the RM 0.50++ psychological resistance levels soon in the coming weeks.

Will be monitoring ELRIDGE closely here as seems to be very strong.

$JPG / 5323 (JOHOR PLANTATIONS GROUP BERHAD) on the other hand after briefly retracing back towards its RM 1.02 support levels last week, was able to breakout all the way towards the RM 1.14 regions on Friday, forming a new high once again with huge volume and buying momentum.

For now, it's definitely one of the most bullish plantation stocks here and as long as able to hold above its RM 1.07+ immediate support levels, could continue on this bullish rally in the coming weeks, forming new highs as the FCPO prices rally.

Will be monitoring JPG closely here as it leads the entire plantation sector.

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) since consolidating over the past month here with RM 2.05 as the main support levels, was able to breakout back towards the RM 2.14 regions on Friday with good volume and buying momentum here despite the mixed market sentiment.

For now looking quite strong and if able to breakout from its RM 2.15+ main downtrend resistance levels on the daily chart, could start trending upwards to the RM 2.20 - RM 2.30+ major resistance levels soon in the coming weeks.

Titan Trading Notes For Friday [25/10/2024]:

$KLCI retraced back towards the 1632 points region with an overall negative market sentiment as we saw over 700 counters closing red along with it for the day. Daily trading volume dipped back towards the 2.6 billion mark, which isn't really a good sight.

Main stocks that showed strong buying momentum would be the likes of NICE, YEWLEE WA, SCABLE, CYPARK, BAHVEST, IHH, TANCO, YEWLEE, and MRDIY. All of which were able to sustain their rallies throughout the day on the top volumes list despite the weak market sentiment.

$NICE / 7139 (NICHE CAPITAL EMAS HOLDINGS BERHAD) so far looking quite strong here as able to breakout towards the RM 0.20 major resistance levels today with good volume and buying momentum despite being overbought here on the daily chart.

For now as long as able to sustain above its RM 0.175+ immediate support, could continue on towards and beyond the RM 0.20+ regions soon for a bullish continuation pattern soon.

Will be monitoring NICE closely here.

$CYPARK / 5184 (CYPARK RESOURCES BERHAD) on the other hand was definitely the star performer today as it was able to breakout strong from its RM 0.725 major resistance levels, rallying all the way back towards the RM 0.80+ regions with huge volume and buying momentum.

For now looking very strong here and as long as able to hold above its RM 0.78+ immediate support levels, could continue on towards and beyond the RM 0.85+ major resistance levels soon.

Will be monitoring CYPARK closely here as something big seems to be brewing.

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) since retracing back towards the RM 1.85+ major support levels earlier this month, had been able to regain momentum and hold above its RM 2.05+ support levels well over the past 2 weeks here on the daily chart.

For now as long as able to hold a higher low region here, could breakout from its RM 2.20+ main downtrend resistance levels on the daily chart for a new uptrend rally soon in the coming weeks.

Will be monitoring KOSSAN closely

Titan Trading Notes For Tuesday [22/10/2024]:

After budget 2025 had been tabled during last Friday, $KLCI suffered from some profit taking activities today, closing red around the 1645 points region with an overall negative market sentiment as we saw almost 650 counters closing red for the day. Daily trading volume remains around the 3 billion mark, which is average.

Main stocks that showed strong buying momentum would be the likes of KHB, NE, SCABLE, CREST, JCY, NICE, PERTAMA, GENETEC, BAHVEST, MICROLN, and YEWLEE. All of which were able to sustain their rallies throughout the day on the top volumes list despite the weak market sentiment.

$KHB / 0322 (KHPT HOLDINGS BERHAD) since its IPO over the past 2 weeks, had been retracing and consolidating around the RM 0.175+ major support levels without much volume and action here, but today, was surprisingly able to breakout from its RM 0.20 major resistance.

So far looking quite strong here as it went all the way towards the RM 0.22 levels with good volume and buying momentum. May have bottomed out already and if able to hold above its RM 0.20 support, could continue on towards and beyond the RM 0.23 - RM 0.245+ regions soon.

Will be monitoring KHB closely here.

$NE / 0325 (NORTHEAST GROUP BERHAD) on the other hand also performing quite well here as able to breakout from its RM 0.545 major resistance levels today and rallied all the way towards the RM 0.59 regions, forming a new high despite the weak market sentiment.

So far looking quite strong here and as long as able to hold above its RM 0.565 immediate support levels, could continue to trend up towards and beyond its RM 0.59 all time high levels for a bullish continuation pattern.

Will be monitoring NE closely as still trending up strongly.

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) since its earlier retracement back towards the RM 1.85+ major support levels earlier this month, had been able to slowly gain traction and broke out towards the RM 2.13 regions with good volume today.

For now looking like it's bottomed out and formed its higher low regions already. As long as able to hold above its RM 2.05 support, could continue on towards and beyond the RM 2.40+ regions soon in the coming weeks.

Will be monitoring KOSSAN closely

Titan Trading Notes For Friday [11/10/2024]:

$KLCI managed to rebound back towards the 1640 points region with an overall positive market sentiment today. Daily trading volume however remains quite low as we closed around the 2.6 billion mark today.

Main stocks that showed strong buying momentum would be the likes of PERTAMA, MYEG, MRCB, BPURI, YTL, NICE, HIAPTEK, SPSETIA, SDCG, IWCITY, YEWLEE, MAHSING, and YTLPOWR. All of which were able to sustain their rallies throughout the day on the top volumes list.

PERTAMA after hitting its RM 0.24+ major support levels yesterday, was able to rebound strong all the way towards the RM 0.32 regions with huge volume and buying momentum today after being massively oversold over the past weeks.

For now still looking strong here and as long as able to hold above its RM 0.295+ immediate support levels, could continue on towards and beyond the RM 0.35+ major resistance levels soon for a further rebound.

Will be monitoring PERTAMA closely here.

$SPSETIA / 8664 (S P SETIA BERHAD) ince retracing all the way back towards the RM 1+ major support levels during last month, had been able to slowly recover its ground and recently was able to hold steady above its RM 1.20+ main support levels.

For now seems to have formed its higher low regions already after neutralizing most of the selling pressure. If able to breakout from its RM 1.30+ major resistance levels, we could see it start to trend back towards the RM 1.50++ regions once more.

Will be monitoring SPSETIA closely here as seems like the buyers are back in control.

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) despite retracing back towards the RM 2.04+ main support levels after TOPGLOV released its QR bomb, had been able to rebound strong and close back towards the RM 2.10 regions with good volume.

So far still looking quite strong here and as long as able to hold above its RM 2.05 immediate support levels, could breakout from its RM 2.15+ major resistance levels soon for an uptrend continuation pattern.

Will be monitoring KOSSAN closely here.

Titan Trading Notes For Thursday [10/10/2024]:

$KLCI retraced briefly back towards the 1634 points region as we remained in a consolidation mode today. Overall market sentiment was mixed after the rebound from the day before as we still saw over 560 counters closing red for the day. Daily trading volume settled around the 3.2 billion mark, which is average.

Main stocks that showed strong buying momentum would be the likes of 99SMART, CAPITALA, MRDIY, VS, SINARAN, SINKUNG, TANCO, and IWCITY. All of which were able to sustain their rallies throughout the day on the top volumes list despite the mixed market sentiment.

CAPITALA after retracing back towards the RM 0.86+ major support levels last week, was able to rebound strongly all the way towards the RM 0.96+ regions today with huge volume and buying momentum.

Although it faced some selling pressure above the RM 0.95+ regions, its closing price of RM 0.935 was still a pretty decent sign here. Looks like it's able to form a higher low support already and if able to hold, expecting further upside here in the coming weeks.

Will be monitoring CAPITALA as smart monies seem to be quite heavily invested in this counter recently.

$99SMART / 5326 (99 SPEED MART RETAIL HOLDINGS BERHAD) on the other hand was also able to resume its buying momentum, breaking out all the way towards the RM 2.54 regions with good volume, forming a new all time high once more despite the mixed market sentiment.

For now still looking strong here and as long as able to hold above its RM 2.40+ immediate support levels, could continue on this parabolic rally here. That said, for those that have not entered, do take note of a potential retracement as the stock had almost been going up continuously over the past few weeks.

Will be monitoring 99SMART closely here.

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) n the other hand is actually leading the glove industry as it broke out strong all the way towards the RM 2.07 regions with huge volume and buying momentum.

For now looking quite strong here and is the only glove stock to hold steadily above its weekly chart's EMA 200 support of RM 1.85+ over the past few months. This could be a sign that something big could be brewing.

Will definitely be monitoring KOSSAN closely here as they also have pretty huge exposure in the US market.

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by CGSI

PETALING JAYA: The US higher import tariffs on China glove makers will benefit Malaysian players including Kossan Rubber Industries Bhd, which may see an estimated earnings accretion of 5% to 6% in the financial year 2025 (FY25) and FY26.

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by HLIB

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by RHB

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by TA
Buy - TP RM2.38

"Satisfactory Performance"

Following the recent weakness in its share price, we upgrade Kossan to Buy (previously hold) with a TP of RM2.38/share based on 1.5x CY25 P/B. In terms of asset quality, Kossan’s cash and investments stood at RM2.1bn as at Jun-24, equivalent to 39.7% of market cap.

Analyst:
Tan Kong Jin
kjtan@ta.com.my

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by RHB
Buy - TP RM2.55

"Hitting The Speed Bump; Keep BUY"

Keep BUY, new MYR2.55 TP (DCF) from MYR2.73, 25% upside. Kossan Rubber delivered a 2Q24 core profit of MYR26.8m (+7% QoQ), bringing its 6M24 numbers to MYR52m, ie 30% and 35% of our and consensus’ estimates. The below expectation results were primarily on global supply chain disruptions. We expect it to deliver stronger 2H24 earnings in view of improving customers’ acceptance levels towards ASP hikes, greater demand visibility, and stabilisation of raw material prices. Our TP incorporates a 5% ESG discount as its 2.8 ESG score is below the 3.0 country median.

Analyst:
Oong Chun Sung
chun.sung@rhbgroup.com

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by Public
Outperform - TP RM2.36

"Improved Sales Volume and ASPs"

Kossan Rubber (Kossan) reported a net profit of RM31.3m in 2QFY24, compared to a net loss of RM3.3m in 2QFY23. After stripping off non-operating items, Kossan recorded a RM26.8m core net profit in 2QFY24, up from a core net loss of RM8.3m in 2QFY23, mainly contributed by stronger sales volume. The results were below consensus at 36% but exceeded our estimates at 59%. The discrepancy in our forecasts was due to the higher-than-expected sales volume and improved ASPs. We gather that Kossan is currently selling at a higher blended ASPs of USD18/1k pcs (previously at c.USD16-17/1k pcs in 4QFY23). We anticipate a sequential uptick in the sales volume in 2HFY24, as demand rises due to a pick-up in stock replenishment activities. Hence, we raise our earnings forecast for FY24F by 18% to factor in higher sales volume and ASPs, while we maintain our FY25F-26F earnings forecasts. Given the recent decline in share price, our TP of RM2.36, which is based on 1.5x (near +1SD 1-year historical mean) CY25F BVPS, is suggesting an upside potential of 16%. Hence, we upgrade our call on Kossan from Neutral to Outperform.

Analyst:
Thye May Ting
thye.mayting@publicinvestbank.com.my

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by MIDF
Neutral - TP RM1.89

"Yet to Reach Supply-Demand Equilibrium"

• Maintain NEUTRAL with a lower target price of RM1.89 post the 2QFY24 results announcement
• Slow demand recovery led to 1HFY24 earnings disappointment of RM52.0m only
• Near-term demand outlook remains challenging which is further compounded by competitive pricing from its oversea peers
• On the flip side, there is little risk of the group to be in a loss-making position again

Analyst:
Foo Chuan Loong, Martin
martin.foo@midf.com.my

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by Maybank
Buy - TP RM2.57

"Expect stronger results in 2H"

Kossan’s 2Q24 core net profit of MYR27m (+7.7x YoY , +7% QoQ) was in line. We expect Kossan to report stronger earnings in 2H24 due to increased sales volume from delayed shipments in 2Q24 and higher plant utilisation rate [UR]s. We lower our FY24-26 earnings forecasts by 8% p.a. on factoring in a stronger MYR (-11% to USD). Our TP is lowered to MYR2.57 (-5sen), on an unchanged 1.7x FY26E P/B. Reiterate BUY.

Analyst:
Wong Wei Sum, CFA
weisum@maybank-ib.com

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by Kenanga
Underperform - TP RM1.56

"1HFY24 Results Came in Below Consensus"

KOSSAN’s 1HFY24 results met our expectation but came in below consensus estimate. It returned to the black in 1HFY24 from a year
ago in the absence of high-cost inventory, although QoQ sales volumes weakened in 2QFY24 as we believe ASPs improved slightly. Massive overcapacity continued to weigh on the sector’s outlook. We maintain our earnings forecasts and UNDERPERFORM call but raise our TP to RM1.56 (previously RM1.48).

Analyst:
Raymond Choo Ping Khoon
pkchoo@kenanga.com.my

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by HLIB
Buy - TP RM3.00

"Impacted by logistics disruptions"

Kossan’s 1HFY24 core PATMI came in at RM52.1m (vs -RM36m in 1HFY23), making up 28% of our (below) and 36% of consensus (below) full year expectations. Stronger +10.9% QoQ core PATMI performance was mainly driven by robust TRP segment and lower effective tax rate, whereas the glove segment was impacted by supply chain disruptions. Going forward, we expect Kossan to deliver a flattish 3QFY24f mainly dragged by the abrupt RM strength against USD, followed by sequentially stronger earnings in coming quarters, underpinned by: (i) ongoing inventory replenishment cycle, (ii) potential trade diversion from US to Malaysia, as well as (iii) higher profit margin from economies of scales. On top of the recovery thesis in CY25f, we do believe there are potential re-rating prospects for
Kossan, considering its more favourable balance sheet and income statement profile vs Hartalega. Keep BUY call on Kossan with a lower TP of RM3.00, based on a P/E multiple of 32x (reflecting its peer Hartalega’s 3-year pre-pandemic mean).

Analyst:
Chee Kok Siang
cheeks@hlib.hongleong.com.my

glove another wind to gogogo? monkeypox spread in singapore and indonesia already
malaysia sure kena soon

https://cutt.ly/iebzOoZh

this morning most gap up 5% d
$HARTA / 5168 (HARTALEGA HOLDINGS BERHAD) $TOPGLOV / 7113 (TOP GLOVE CORPORATION BHD) $KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD) $SUPERMX / 7106 (SUPERMAX CORPORATION BERHAD)

$KOSSAN / 7153 (KOSSAN RUBBER INDUSTRIES BERHAD)
Research by Public
Neutral – TP RM2.36

" Better Days Ahead"

We came away from a meeting with Kossan Rubbers’ (Kossan) Group MD/CEO, Tan Sri Lim Kuang Sia feeling upbeat on the medium-term outlook of the Malaysian rubber glove industry. Kossan is currently selling at a higher blended ASPs of USD18/1k pcs (previously at c.USD16-17/1k pcs in 4QFY23). As demand for gloves continue to increase due to customers replenishing their depleting inventories, we anticipate a sequential uptick in sales volume for 2HFY24. Kossan is running at a higher utilisation rate of 60% (4QFY23: 50%) based on a 24.5bn pcs/annual installed capacity. Raw material prices, i.e. nitrile butadiene is expected to normalise in 2HFY24 which we believe this should lead to a higher margin in the gloves segment going forward. Kossan remains the most resilient among its peers with a 33% net cash-to-market cap. While we foresee Kossan to report higher earnings, we believe this positive outlook is mostly reflected in its current valuation. Therefore, we maintain our Neutral rating on Kossan, with unchanged TP of RM2.36 based on 1.5x (near +1SD 1-year historical mean) CY25F BVPS.

Analyst:
Thye May Ting
thye.mayting@publicinvestbank.com.my