KLCI Stock - SUPERMX / 7106 - 2010 Quarter 3

Market Cap : 339463040*4.54 = 1,541,162,201.60 (Large)
NTA per share : (690253-28716)/339463 = 1.95
P/BV : 4.54/1.95 = 2.3282
Forecast P/E now : (4.54-0.135)/0.4946 = 8.91 (Low)
ROE : 27.52% (High)
DY : 0.135/4.54*100 = 2.97% (Low)
Fixed Asset Turnover(4 year) : (0.8653+0.9014+0.8414+0.6018)/4 = 0.8025 (Moderate)
Liquidity Ratio : 448202/157983 = 2.837 (Moderate)
Receivables Collection Period : (232816+157093)/2/(886998/365) = 80 days (Acceptable)
My Target Price : 5.94 (PE 12, EPS 0.4946, DPS 0.135)
My Decision : BUY
My Comment : Revenue increasing but slow down, debt decreasing, strong cash, navps increased, USD remained weak, latex price increasing, Group expanding, switching part of production lines to produce more Nitrile Powder Free gloves
Technical Support Price : 4.2, 3.8
Risk Rating : MODERATE
OSK Target Price : 7.84 (08 Nov 2010)

My notes based on 2010 quarter 3 report (number in '000):-

- The Group sold more gloves during the current quarter compared to the corresponding quarter a year ago but revenue was slightly lower by 1%. This is because the USD has continuously & steadily weakened against the Ringgit by 10.2% during this period from an average of USD1:RM3.52 to USD1:RM3.16

- The weakening US Dollar together with escalating latex prices where latex is the largest cost component in rubber glove manufacturing at close to 60% of total costs and it rose by 58% during this period; contributed to a contraction in profit margins. The escalation & increase in latex prices and the weakening of the US Dollar were faster than the costs pass through onto the product selling prices during this period. As such, Profit before tax and Profit after tax fell by 11.3% and 5.0% respectively

- Group revenue rose marginally compared to the preceding quarter by 0.11%. Although there was capacity growth, the continued weakening of the USD suppressed revenue growth this quarter. The US Dollar fell a further 2% from USD1:RM3.24 to USD1:RM3.16 during this period

- The weakening of US Dollar and continuous increase in latex prices at a fast pace led to margins being squeezed as costs increase transfer onto the product pricing is slower than the material costs increases & the weakening of the US Dollar. Profit before tax and Profit after tax fell by 15.1% and 16.8% respectively

- Estimate next 4Q eps after 2010 Q3 result announced = 0.1124*4*1.1 = 0.4946, estimate PE on current price 4.54 = 8.91(DPS 0.135)
- Estimate next 4Q eps after 2010 Q2 result announced = 0.1351*4*0.9 = 0.4864(correction), estimate highest/lowest PE = 10.82/7.43 (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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