KLCI Stock - SUPERMX / 7106 - 2010 Quarter 2

Market Cap : 339463040*5.22 = 1,771,997,068.80 (Large)
NTA per share : (652009-28716)/339463 = 1.84
P/BV : 5.22/1.84 = 2.837
Forecast P/E now : (5.22-0.135)/0.5674 = 8.96 (Low)
ROE : 30.89% (High)
DY : 0.135/5.22*100 = 2.59% (Low)
Fixed Asset Turnover(3 year) : (0.8705+0.9358+0.7709)/3 = 0.8591 (Moderate)
Liquidity Ratio : 445887/197145 = 2.2617 (Moderate)
Receivables Collection Period : (245227+161510)/2/(889456/365) = 83 days (Acceptable)
My Target Price : 6.81+0.14 = 6.95 (PE 12, EPS 0.5674, DPS 0.135)
My Decision : BUY
My Comment : Revenue increasing compared to previous year corresponding period but not exceed max revenue on 2009 Q3, debt decreasing, navps decreased due to bonus issue, USD remained weak, latex price for Julai & August lower than April to Jun
Technical Support Price : 5
Risk Rating : MODERATE
OSK Target Price : 9.11 (27 Aug 2010)

My notes based on 2010 quarter 2 report (number in '000):-

- Group revenue rose by 24.6% on the back of strong global demand for rubber gloves as well as higher selling prices

- However, despite a challenging operating environment, the Group did well to record
profitability growth over the corresponding quarter a year ago. Profit before tax and profit
after tax rose by 55.8% and 77.9% respectively. The improvement in profitability is attributed to the revenue growth as well as cost savings from higher efficiency and productivity from improved processes and refurbished lines

- Group revenue is higher compared to the preceding quarter by 6.4%. The increase is mainly attributed to increased capacity from its newest plant following the commissioning of new lines during the current quarter

- However, latex prices rose to new historical highs during this current quarter and coupled with the strengthening Ringgit, they gave rise to some margin erosion. Profit before tax and profit after tax fell by of 10.0% and 10.9% respectively

- Global demand and consumption has been growing at between 8 to 10% per annum and this organic growth rate is expected to continue going forward. The industry would see spikes in demand with high demand retention should more countries implement regulations on rubber glove use (e.g. Brazil in 2009) and in the event of disease outbreaks (e.g. H1N1 in 2009)

- The passing into law of the US Healthcare Reform Bill is also expected to take consumption of rubber gloves up a notch. The US is already the largest consumer of rubber gloves, accounting for about 40% of global consumption, and this is expected to grow upon implementation. China is another large populous country which has recently unveiled its healthcare reform plans and once implemented, rubber glove consumption would be brought to another level altogether

- The Company has embarked on Phase No. 1 of the Glove City Project in March 2010 with the commencement of the groundbreaking works. The first factory would be operational by second half of 2011

- Estimate next 4Q eps after 2010 Q2 result announced = 0.1351*4*1.05 = 0.5674, estimate PE on current price 5.22 = 8.96(DPS 0.135)
- Estimate next 4Q eps after 2010 Q1 result announced = 0.6576+0.0253 = 0.6829, estimate highest/lowest PE = 10.38/8.77 (DPS 0.11)
- Estimate next 4Q eps after 2009 Q4 result announced = 0.1644*4 = 0.6576, estimate highest/lowest PE = 11.16/8.24 (DPS 0.11)
- Estimate next 4Q eps after 2009 Q3 result announced = 0.1514*4 = 0.6056, estimate highest/lowest PE = 10.15/5.3 (DPS 0.0325)
- Estimate next 4Q eps after 2009 Q2 result announced = 0.0972*4 = 0.3888, estimate highest/lowest PE = 8.74/5.14 (DPS 0.0325)
- Estimate next 4Q eps after 2009 Q1 result announced = 0.0743*4 = 0.2972, estimate highest/lowest PE = 6.52/5.01 (DPS 0.0325)
- Estimate next 4Q eps after 2008 Q4 result announced = 0.2499, estimate highest/lowest PE = 6.67/3.07 (DPS 0.0325)

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