Tuesday 11 August 2009

Earnings, share price upgrade for Latexx


Earnings, share price upgrade for Latexx

Tags: Brokers Call CIMB Research Latexx

Written by Financial Daily
Tuesday, 04 August 2009 14:01

RUBBER glove producer LATEXX PARTNERS BHD [ LATEXX 2.230 0.060 (2.765%) ] has earned a place in analysts’ good books following a sterling second-quarter (2Q) performance against a landscape of stronger demand for disposable gloves due to the outbreak of the H1N1 pandemic.

In a note, CIMB Research said it had raised its earnings forecast for Latexx by 20% for financial year ending Dec 2009 (FY09) and some 5% for FY10 and FY11. The earnings upgrade, in turn, led CIMB to increase its fair value for Latexx shares by 5.3% or 13 sen to RM2.56.

“We maintain our outperform recommendation on Latexx, premised on the potential share price trigger of improving quarterly earnings, driven by its high utilisation rates and ongoing expansion,”CIMB said.

The revised fair value is derived from a price-earnings ratio (PER) of 10.5 times FY10 earnings. Latexx shares closed one sen down at RM1.90 yesterday.

Latexx’ net profit in 2Q ended June 2009 jumped tenfold to RM11.41 million from RM1.14 million a year earlier as the company bumped up its glove production capacity and sold more gloves. Revenue surged 73.3% to RM74.43 million from RM42.95 million.

First-half net profit was up nine times to RM20.55 million from RM2.28 million a year earlier while revenue leapt 60% to RM144.75 milion from RM90.74 million.

Latexx’s capacity expansion is on track. Since the previous quarter, the group has added four double-former glove production lines, increasing its annual capacity to 5.2 billion pieces from 4.4 billion pieces as at June.

The firm planned to add four more lines in 2H09 to increase its yearly capacity to six billion pieces by year-end.

“The prognosis for the medical glove industry is favourable in light of rising healthcare needs and greater awareness of the need for hygiene, especially with the increasing incidence of health scares.

“Latexx is in an excellent position to tap this growth as more than 90% of its production is catering to this segment,” said CIMB.


This article appeared in The Edge Financial Daily, August 4, 2009.

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