Latexx: Another GARP stock

Latexx
3.8.2010
Price 3.550
ttm-PE 11.05
DY 0.99

Historical 1 Year Data
EPS GR +++ High
PE range 7.7 to 12.4
DY range 1.3 to 0.8

5 Yr EPS GR Not Meaningful
5 Yr DPS GR Not Meaningful
This company turned profitable 2005-2006.

Its present PE is just above the mid-range of its this year's PE range.
Its DY is at the lower part of this year's DY range.



Recent Price Performance

1 Week	-1.1%		13 Weeks	3.2%
4 Weeks	-6.5%		52 Weeks	88.5%

Players in the Glove Sector
Adventa
ttm-PE 16.69 DY 2.36
Hartalega 
ttm-PE 13.87 DY 2.32
Kossan 
ttm-PE 15.06 DY 1.15
Riverstone (Singapore)
ttm-PE 11.13 DY 3.02
Rubberex 
ttm-PE 2.58 DY 2.88
Supermax
ttm-PE 17.74 DY 0.85
Topglove
ttm-PE 15.42 DY 1.73

How sustainable are the earnings in this sector going forward?

LATEXX - CIMB Research maintains overweight on rubber glove sector

June 22, 2010
LATEXX - CIMB Research maintains overweight on rubber glove sector
Stock Name: LATEXX
Company Name: LATEXX PARTNERS BHD
Research House: CIMB

KUALA LUMPUR: CIMB Equities Research said despite the potential hiccups, it remains positive on the rubber glove sector and retain its OVERWEIGHT call.

It said on Tuesday, June 22 the outlook for rubber gloves remains positive as demand is still set to rise by at least 8-10% p.a., led by growth in the usage of medical gloves in emerging countries.

CIMB Research said the results announced during Apr- Jun proved that the rubber glove is a resilient sector and that cost changes have minimal impact on margins due to the transparent method of passing on the previous month's average latex price and RM:US$ exchange rate to customers.

'We expect earnings for rubber glove players to continue heading higher this year, especially given the additional capacity that is coming in. We make no changes to our earnings forecasts or Outperform calls for all the rubber glove players,' it said.

Its top picks remain are Supermax which sells most of its gloves under its own brand which allows it to command higher margins and gives it a strong presence in markets such as the US and Brazil.

It added that Latexx is well on course for continued growth, thanks to its aggressive expansion and move into the premium segment.

'Our Outperform call remains intact, along with our target price of RM5.44, which we continue to base on an 11.6x P/E or a 30% discount to Top Glove's target P/E of 16.5x,' it said.

http://bursapricetarget.blogspot.com/2010/06/latexx-cimb-research-maintains.html

Latexx Partners on aggressive expansion plans (3.2.2010)

Latexx Partners on aggressive expansion plans

February 3, 2010, Wednesday

KUCHING: Latexx Partners Bhd (Latexx Partners) is on aggressive expansion plans for the next few years to meet the increasing demand for rubber gloves.

HUGHER EARNINGS: A small box which contains nitrile disposable gloves. Latexx Partners, which is expected to release its earnings figure by the end of this week will witness the company reported strong earnings supported from higher prodcution capacity and more nitrile sales.

According to CIMB Investment Bank Bhd (CIMB) in a research report, it noted the company planned to bring forward the construction of its seventh plant this year from 2013.

The research firm observed that the company had been expanding its nitrile production capacity that made up about 20 per cent of sales in the fourth quarter of 2009 as compared with 18 per cent in the previous quarter.
It also observed that the company’s nitrile range had expanded to more than 30 per cent of its production as the group was recently awarded new contracts by major multi national companies.

Additionally, the research firm pointed out that the fifth largest rubber glove manufacturer in the country also aimed to be a premium rubber glove player by exploring more opportunities to develop the natural rubber (NR) powder-free and nitrile range gloves.

Meanwhile, CIMB stated that Latexx Partners’ recent tied up with Dutch Company, Budev BV to develop protein-free natural rubber (NR) gloves currently unavailable in the market to provide a further boost to its earnings and margins.

The research firm said the rubber glove manufacturer was presently the only company licensed to produce such gloves.

Financially, CIMB estimated that Latexx Partners could report its fourth quarter net earnings of around RM17 million. The research firm highlighted that the strong figures would be supported by its additional annual production capacity of 800 million pieces of rubber gloves during the quarter and high nitrile products sales.
Therefore, CIMB believed that the fourth quarter earnings results for Latexx Partners were expected to be robust, boosted by higher production capacity and more nitrile sales. The research firm predicted that Latexx full-year net profit was likely to meet its forecast of RM51.9 million.

Thus, the research firm retained its earnings forecasts for Latexx Partners and maintained its positive outlook for the company with a target price of RM5.44 per share.

http://www.theborneopost.com/?p=8461

Historical Investment Data for Latexx (7.6.2010)

Historical Investment Data for Latexx (7.6.2010)
http://spreadsheets.google.com/pub?key=t73kBT7EVW5Ca8Jxrct4ADw&output=html

Technology to fatten Latexx profit margin

By Lynn Omar and Ooi Tee Ching
Published: 2010/05/08
Business Times

LATEXX Partners Bhd (7064) is set to see fatter profit margin next year, after securing a technology to make natural rubber gloves for medical practitioners with hypersensitive skin.

These gloves will be priced more than an ordinary pair of gloves but Latexx declined to say by how much.

Latexx's net profit margin stood at 16 per cent for 2009, which is better than its bigger rival Top Glove Corp Bhd which is below 14 per cent now.

Hartalega Holdings Bhd has the best margin at 24 per cent.
In the last decade, glovemakers produced more synthetic gloves after a small number of the developed world's doctors and nurses complained of their allergy to natural rubber and deemed it unsafe.

Basically, their skin is hypersensitive to the protein residue in natural rubber gloves.

Famous hospitals like the Johns Hopkins Hospital and Shriner's Hospital in the US went to such extent of viewing such allergic reaction as serious threats that they banned natural rubber medical devices and switched to synthetic gloves and catheters.

But the fact remains that natural rubber gloves are more comfortable to wear and far more elastic.

With this MPXX(TM) technology from Budev BV that "washes off' protein content in natural rubber", Latexx chief executive officer (CEO) Low Bok Tek anticipates some hospitals and dental clinics in North America and Europe to switch back to natural rubber gloves.

"When our clients see the MPXX technology logo, they'll know they are using virtually protein-free natural rubber gloves," said Low.

He was speaking to reporters after a briefing for analysts in Kuala Lumpur yesterday. Also present were Latexx head of corporate services Dr Liew Lai Lai and Budev CEO Michiel Paping.

"We recently imported the sample machine here to wash off the protein residue from the natural rubber gloves. Our initial estimate is to 'wash' 500 million pieces a year," said Paping.

Latexx is also hopeful of dishing out more dividends to shareholders this year on prospects of robust glove sales. The group declared dividends of 2.5 sen a share for the first quarter of this year.

Read more: Technology to fatten Latexx profit margin http://www.btimes.com.my/Current_News/BTIMES/articles/laytexx-2/Article/index_html#ixzz0nPEv7b4O

Comparative analysis of Glove companies (9.5.2010)

Comparative analysis of Glove companies (9.5.2010)
http://spreadsheets.google.com/pub?key=thG2gqUrXjSrcpL3LAlPbRg&output=html

The whole sector has been re-priced since last year.  The average PE for the sector is around 15.

Topglove trades at a slight premium.  It is debt free and has net cash.  It should continue to generate a lot of free cash flows in years to come.

Hartalega has done extremely well.  It enjoys the biggest profit margin amongst the glove companies.  This is due to its use of automation to increase productivity.  It has overtaken the other more established companies and ranks 3rd in the earnings table.

Latexx has made a remarkable turnaround.  It has good earnings and should continue to grow.  Due to its smaller size, its growth is anticipated to be the fastest amongst all the glove companies.

Supermax is the most indebted of all the glove companies.  Given the better glove business environment, perhaps, its management may surprise the investors in the next year or two.  Meantime, its not as attractive as the above three companies in term of fundamentals.

Kossan has been disappointing.  Kossan continues to carry a lot of debt despite having been a long player in the market when many other players have benefited from the strong revenue and margin growths to pare down their borrowings.  Its profit margin is below the average of the industry.

Adventa gets good press.  However, when comparing its fundamentals with its peers, it is not such an attractive stock.  Its dividend payout is the highest in the industry compared to the industry average of nearer 20%.  Moreover, its PE is the highest among the glove companies, but this does not appear to reflect its growth potential.

Rubberex is a disappointment and stood up quite apart from the fast moving players in this industry.

There are also significant risks in this industry, best summarised here:


Solid earnings growth as supplanted by 

• capacity expansion, and
• positive newsflow

should lead to further expansion in PE multiples.

Key risks include

• a sudden surge in latex price,
• energy input costs or
• an unfavourable ringgit/US$ foregin exchange rate movement.

A quick look at Latexx (8.5.2010)

A quick look at Latexx (8.5.2010)
http://spreadsheets.google.com/pub?key=tMGIE1j8l7f8e27I8inQUig&output=html

Latexx more than doubles net profit to RM21m in 1Q

3.5.2010

KUALA LUMPUR: LATEXX PARTNERS BHD [] more than doubled its net profit to RM20.72 million for the first quarter ended March 31, 2010 (1QFY10) from RM9.14 million a year earlier on the back of capacity expansion, aggressive marketing strategy and overall cost savings.

Revenue surged 79.4% to RM126.17 million from RM70.32 million, while earnings per share rose to 10.52 sen from 4.7 sen. It declared a tax exempt interim dividend of 2.5 sen per share.

In notes accompanying the results on Monday, May 3, Latexx said at pre-tax level, its profit was 37.2% higher at RM23.25 million compared with RM16.95 million recorded in the preceding quarter.

It said despite the increase in raw material prices and the weakening US dollar, the increase in the group’s profit was due principally to increased sales volume and improved overall efficiency achieved giving rise to lower overheads, operational and supervision costs.

Latexx is confident that growth in FY10 will be sustained along with the world’s growing appetite for medical gloves in the health sector.

“The strategy of increasing capacity and switching to a better mix of products coupled with more aggressive marketing efforts by penetrating into new markets will contribute to sustainable profitability,” it said.

The company said an additional plant next to existing facilities had been completed and the commissioning of the remaining production lines was in progress. It expects to boost production capacity to nine billion pieces of gloves per year by 2011.

Latexx said following its joint-venture agreement (JVA) with Netherlands-based Budev BV, its unit Total Glove Company Sdn Bhd had entered into a licensing agreement with Budev for the exclusive right to use their TECHNOLOGY [] for the treatment of latex examination and surgical gloves to lower protein and allergen to non-detectable levels to prevent allergic reactions.

The JVA and licensing agreement would enable Latexx to embark on a new phase of technology and enhance its product range, and would also allow the group to reinforce its competitive edge in the global market through innovative production methods to produce high quality gloves for its customers, it said.

http://www.theedgemalaysia.com/business-news/165213-latexx-more-than-doubles-net-profit-to-rm21m-in-1q.html

Comment:  Will Latexx be able to achieve MR 100 million net profit for this financial year????

A quick look at Latexx (3.5.2010)

A quick look at Latexx (3.5.2010)
http://spreadsheets.google.com/pub?key=tECNeQDUY1U6NYZKZZlixQQ&output=html

Comparative Analysis of Glove Companies

Comparative Analysis of Glove Companies
http://spreadsheets.google.com/pub?key=tiEBLAmYR0EJiE7ccJcc8bw&output=html

A quick look at Latexx

A quick look at Latexx
http://spreadsheets.google.com/pub?key=tCBaT5VvGDp2xCY3zXOPcLQ&output=html

Read an analyst who mentioned that this company may target an earning of RM 100 million in a year's time.  How probable is this?   Your speculative guess is as good as mine. ;-)

Latexx's earnings continue to improve

Latexx's successful ongoing expansion plan should ensure strong growth for FY2010 and FY 2011.

Latexx CEO Low Bok Tek revealed an aggressive expansion plan to boost the company's rubber glove capacity in May 2009.

Planned targets were:

• beginning of 2009 - 4 billion pieces per year
• end of 2009 - 6 billion pieces per year
• end of 2010 - 7.5 billion pieces per year
• 2012 - 9 billion pieces per year.

Present targets:

• Latexx completed 3 double former lines at its newly built Plant 1 before Chinese New Year, increasing capacity to 6.6 billion from 6 billion at the end of 2009.
• Additional lines will be added to Plant 1 to up capacity to 9 billion pieces a year by the end of 2010 - 2 years ahead of target.

Latexx was successful in clinching new multinational customers to take up the 3 billion pieces a year capacity at Plant 1 even before it was completed.

• In 2008, it sold 2.68 billion pieces.
• It sold 3.82 billion pieces in 2009, 43% more than 2008.
• In Q4 2008, Latexx sold 750 million pieces.
• In Q4 2009 alone, Latexx sold 1.15 billion pieces.

All of Latexx's plants are located on a 50-acre site in Kamunting, Perak.  Latexx still has 12 acres of unutilised land to build plants 7 and 8.  Each plant has the capacity to produce 3 billion pieces of gloves a year.

• Plant 7 has already been cleared, which could boost its capacity by another 3 billion to 12 billion by the end of 2011.

Although the lines can be used for the production of both nitrile and natural latex gloves, Latexx is focusing on nitrile gloves for its new lines, because the margins for nitrile are higher than for natural rubber glove.

• Nitrile accounted for 20% of glove production in 2009.
• By 1QFY2010, this percentage will increase to 35%.

Latexx's successful ongoing expansion plan should ensure strong growth for FY2010 and FY 2011. 

Net profit surged:

• from RM15.2 million in 2008
• to 52.2 million in 2009
• as net profit margin expanded from 6.8% to 15.9%.

Judging from the company's

• rapid expansion plan and 
• rising margins arising from economies of scale and 
• higher nitrile production, 

a FY2010 net profit of RM 100 million is within reach.

Successfully boosting capacity by 3 billion pieces of gloves a year in 2010 will set the stage for a surge in 2011 profits, which will benefit from

• Plant 1's full-year contributions, and 
• additional contribution from Plant 7.

Latexx is conserving its cash flow for growth, so dividend yield may not be so attractive.

Net debt at end of 2009 - RM 57.4 million
Net gearing:  47% in 2008 declined to 33.7% in 2009.

Estimated cash flow in 2010 - RM 110 million
Capital expenditure in 2010 - RM 75 million.

The share prices of rubber glove companies have corrected on fears of an impending oversupply in 2011.  Although the new supply will reduce the current shortage, it need not necessarily lead to a price war, which is detrimental to all players.

Margins may be squeezed but industry growth will continue at 8% to 10% per annum, probably faster for Malaysian rubber glove companies due to outsourcing by multnationals and the exit of small players.

In a world where growth is uncertain, rubber glove companies are attractive because:

• they enjoy steadily rising demand which is recession proof,
• pricing power to pass on rising raw material costs, and
• low PERs of less than 10 x compared with almost 20 x for the large plantation and construction companies with cyclical earnings.

Ref:
Latexx:  Overachieving its growth promise
by Choong Khuat Hock
The Edge Malaysia 22.2.2010

Latexx Partners 4Q net profit up 157% to RM17m

Latexx Partners 4Q net profit up 157% to RM17m
Written by Joseph Chin
Friday, 05 February 2010 17:47

KUALA LUMPUR: LATEXX PARTNERS BHD []'s net profit in the fourth quarter ended Dec 31, 2009 jumped 157% to RM17.27 million from RM6.72 million a year ago, underpinned by

• recent capacity expansion,
• aggressive marketing strategy and
• overall cost savings.

The glove maker said on Friday, Feb 5

• group revenue increased 47.1% to RM102.84 million from RM69.86 million while
• pre-tax profit increased 158.8% to RM17.39 million from RM6.72 million.
• Earnings per share were 8.86 sen versus 3.45 sen.
• It proposed a dividend of one sen per share.

For FY09,

• group revenue rose by 47.1% to RM328.43 million from RM223.25 million in FY08 while
• net profit jumped 243% to RM52.1 million from RM15.19 million.
• Profit before tax increased 243.6% to RM52.22 million from RM15.20million.

On the outlook, Latexx was upbeat about repeating the FY09 growth in tandem with the growth of world demand for medical gloves in the health sector.

"The strategy of increasing capacity and switching to a better mix of products coupled with more aggressive marketing efforts into new markets will contribute to a sustained flow of profitability," it said.

• Latexx said the installation of eight double formers production lines was completed in December 2009 and is in full operation.
• In addition, the CONSTRUCTION [] of an additional production plant adjacent to existing production facilities is in progress.
• It is expected to start operation in early 2010 and total capacity will increase to 9 billion pieces per annum by 2011.

On Jan 8, Latexx teamed up with Dutch company Budev BV to manufacture and distribute natural rubber gloves that would have non-detectable level of proteins and allergens.

This tie-up with Budev would enable the group to produce a new and potentially higher margin product.

"The JV is expected to benefit the group with a major technological boost and a competitive advantage in the global market. In addition, the group has also targeted to increase nitrile output to more than 30% in the 1st quarter FY2010 due to strong demand," it said.

http://www.theedgemalaysia.com/business-news/159228-latexx-partners-4q-net-profit-up-157-to-rm17m.html

Note:  Latexx's three-year EPS CAGR of 104.4% is the highest in the industry (CIMB Research Feb 2)

Rubber glove companies enjoy pricing power and steadily rising sales

Judging from the capacity expansion by rubber glove companies, it appears that larger glove companies like Top Glove, Supermax and Sempermed (Thailand) have more moderate expansion plans as a percentage of existing capacity, while smaller ones like Latexx and Adventa have more aggressive expansion plans and are likely to show higher earnings growth in 2010. 

An oversupply of rubber gloves is unlikely in 2010 but could be a worry in 2011 when more capacity comes onstream. Assuming that the 150 billion-a-year medical glove market grows by 8% a year, an additional capacity of 12 billion gloves will be required per year.  Rubber glove companies have been able to pass on higher costs arising from rising latex prices, with Top Glove increasing prices again in January 2010. 

Nevertheless, producers of nitrile gloves may now enjoy better margins as the cost advantage that latex gloves enjoy over nitrile gloves may have narrowed as latex prices have risen faster than nitrile prices.  Ratings of Malaysian rubber glove companies are still cheaper than those of Ansell, SSL International and the Malaysian market.

The Edge
1.2.2010
By Choong Khuat Hock


Comments:

The whole glove industry is growing.  Due to capacity expansion and their smaller sizes, the smaller glove companies are expected to show faster earnings growth than the bigger glove companies.

The industry business is still resilient.  Profit margin is either maintained or improving.  Glove companies are still able to pass the cost to the customers.  How long will this last?

This industry is highly competitive.  The business is driven by volume and price.  When capacity to supply outstrips demand, those companies with durable competitive advantage are expected to survive.  Those low cost producers will be the big winners and leaders.  Those companies that automate their production with good quality control will probably be able to lower their costs per unit through increasing productivity.  It is possible that those leveraging on low human labour costs now with no or few plans for increasing automation of the manufacturing processes, may eventually lose out to the former in the future both in terms of quality, productivity and costs.

OMG Latexx!

Latexx closed at MR 4.60 today

Glove makers surge in early trade

Glove makers surge in early trade


Written by Joseph Chin
Monday, 11 January 2010 09:33

KUALA LUMPUR: Shares of glove markers rose in early trade on Monday, Jan 11, bucking the weaker market sentiment, with Latexx, Hartalega and Rubberex, following a positive outlook for the sector and spurred by Latexx's latest venture.

At 9.26am, the FBM KLCI fell 1.45 points to 1,291.53. Turnover was 131.13 million shares valued at RM103.91 million.

Hartalega added 15 sen to RM6.87, Latexx 14 sen to RM3.61 and Rubberex-WA 12 sen to RM1.92.

Interest in Latexx was also spurred by its Amsterdam-based Budev BV to set up a joint-venture company to market and distribute protein-free gloves.

Budev owns the intellectual property rights related to a TECHNOLOGY [] to reduce proteins causing latex allergy.

http://www.theedgemalaysia.com/business-news/157168-glove-makers-surge-in-early-trade.html


Latexx up on protein-free glove venture

Tags: Budev | Latexx Partners | protein-free gloves

Written by Joseph Chin
Monday, 11 January 2010 09:23

KUALA LUMPUR: LATEXX PARTNERS BHD [] securities rallied in early trade on Monday, Jan 11 after it proposed to team up with Amsterdam-based Budev BV to set up a joint-venture company to market and distribute protein-free gloves.

At 9.11am, its warrants, Latexx-WA rose 18 sen to RM3.10 with 305,400 units done while the shares added 16 sen to RM3.63 with 997,700 shares done.

The FBM KLCI shed 0.94 point to 1,2919.04. Turnover was 80.87 million shares valued at RM57.52 million.

It is teaming up with Amsterdam-based Budev BV to set up a joint-venture company to market and distribute protein-free gloves. Budev owns the intellectual property rights related to a TECHNOLOGY [] to reduce proteins causing latex allergy.

The JV company, Total Glove Co Sdn Bhd will have a paid-up of RM9,998 or 9,998 shares of RM1 each. Latexx and Budev will subscribe for 4,999 shares each in the JV company.

Latexx said the JV would treat natural rubber latex examination and surgical gloves using its technology.

The JV company will market and distribute these gloves, which will have "non-detectable level of proteins and allergens" to prevent users from having an allergic reaction. Budev will grant an exclusive licence to the JV company for the use of the technology.

Latexx said the proposed JV would enable it to venture into a new era of technology to treat natural rubber latex examination and surgical gloves with extremely reduced levels of proteins and allergens to non-detectable level to prevent users from having an allergic reaction.


http://www.theedgemalaysia.com/business-news/157167-latexx-up-on-protein-free-glove-venture.html

Latexx to venture into protein-free gloves

Latexx to venture into protein-free gloves

Tags: Budev | Latexx Partners | protein-free gloves

Written by Joseph Chin
Friday, 08 January 2010 19:38

KUALA LUMPUR: LATEXX PARTNERS BHD [] is teaming up with Amsterdam-based Budev BV to set up a joint-venture company to market and distribute protein-free gloves.

Latexx said on Friday, Jan 8 that Budev owns the intellectual property rights related to a TECHNOLOGY [] to reduce proteins causing latex allergy.

The JV company, Total Glove Co Sdn Bhd will have a paid-up of RM9,998 or 9,998 shares of RM1 each. Latexx and Budev will subscribe for 4,999 shares each in the JV company.

Latexx said the JV would treat natural rubber latex examination and surgical gloves using its technology.

The JV company will market and distribute these gloves, which will have "non-detectable level of proteins and allergens" to prevent users from having an allergic reaction. Budev will grant an exclusive licence to the JV company for the use of the technology.

Latexx said the proposed JV would enable it to venture into a new era of technology to treat natural rubber latex examination and surgical gloves with extremely reduced levels of proteins and allergens to non-detectable level to prevent users from having an allergic reaction.

"The proposed JV will augur well for Latexx to produce innovative, value-added with excellent quality glove products in its effort to reinforce its competitive edge in the global market.

"The adoption of such new technology will be beneficial for the short and long term goals of Latexx. It is consistent with Latexx's intention to seek strategic alliances and joint ventures for synergistic benefits to enable Latexx to be competitive with innovative production methods to produce high quality gloves for its customers," it said.

http://www.theedgemalaysia.com/business-news/157118-latexx-to-venture-into-protein-free-gloves.html

Glove Sector 31.12.2009

http://spreadsheets.google.com/pub?key=t6TE7RNPw5F-C3fpPVBWFKQ&output=html

Latexx 2.11.2009

http://spreadsheets.google.com/pub?key=tzHjf-aElnBsLJpSKK319Uw&output=html