Kossan Rubber Industries / Lim Kuang Sia

Kossan Rubber Industries / Lim Kuang Sia

Postby winston » Fri May 20, 2011 4:31 pm

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Kossan Rubber Industries [KRI MK] - Buy : Down too.. you just cant win this quarter ( RM3.23 / PT: RM4.76 )

Earnings for Kossan were down 22% sequentially, missing our and street estimates mirroring a similar trend to most of its peers seen recently; however given a higher nitrile product mix, the expected contractions were less than the 25% and 30% seen by Supermax and Top Glove, who have a higher natural rubber mix.

It remains at 6.8x PE despite a more refined product mix, and lesser margin contractions.

Source: Nomura
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Re: Kossan Rubber Industries

Postby winston » Sat Aug 02, 2014 4:57 am

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Kossan looks past oversupply fears BY JOHN LOH
July 5, 2015

DATUK Lim Kuang Sia, who founded Kossan Rubber Industries Bhd some 35 years ago, isn’t a fan of how “glut” has been used to describe the rubber glove sector.

“I don’t believe there is an oversupply,” he tells StarBizWeek.

According to Lim, the managing director and chief executive officer of Kossan, Malaysia’s second-largest rubber glove maker by production capacity, domestic glove players aren’t biting off more than they can chew.

“The new capacity will come onstream in stages, not overnight. We will grow with demand,” says the affable Lim.

“The current global market for rubber gloves is 170 billion pieces a year. We are supplying to the world. Is consumption getting smaller? What my competitors do is not under my control. The point is, in this growing market, do we have an edge over our competitors?”

He also dismisses talk of a price war brewing among Malaysia’s hyper-competitive glove producers, namely, the “big four” of Kossan, Top Glove Corp Bhd, Supermax Corp Bhd and Hartalega Holdings Bhd.

Malaysian glove players dominate about over 60% of global output and have kept a lead over rivals in Thailand, Indonesia and China due to advances in technology and relatively cheap production costs.

Kossan’s total installed capacity stands at 22 billion pieces of gloves, up from 16 billion pieces last year. The group is on track to double its total production capacity to 35 billion pieces of gloves by 2017 and nitrile production to 14 billion by 2015, which will see it unseat Hartalega and Top Glove as the top two producers of nitrile gloves.

Kossan is targeting a product mix of 80% nitrile and 20% natural rubber gloves by 2016 from 60:40 currently. But it is hardly the only one with plans to ramp up its nitrile capacity, fuelling concerns that the industry could be hit by a surfeit of gloves.

Glove producers are rushing to fulfil demand for nitrile-based gloves made from butadiene, a type of petrochemical, as synthetic rubber gloves typically enjoy higher pre-tax margins of 22%-25%% compared to 10%-12% for natural rubber gloves.

Analysts say local glove manufacturers posted disappointing volumes and margins in the January-to-March quarter on the back of weaker sales and depressed margins.

Of the four glove makers, only Kossan saw its core earnings improve 8%, according to AllianceDBS Research. Their share prices fell in tandem.

Hartalega, Supermax and Top Glove have shed 12.17%, 21.3% and 18.65% of their values, respectively, since the beginning of the year, as opposed to a 1% gain for the benchmark FTSE Bursa Malaysia KL Composite Index.

Kossan is down 8.33% year-to-date based on yesterday’s close of RM3.96, giving it a market capitalisation of RM2.53bil. The stock went from laggard to outperformer last year, surging 112.81% in the second half after investors warmed to its growth potential.

Rising costs

Overall sales volumes for the big four glove manufacturers slid 4% year-on-year in the three months to March, says AllianceDBS Research.

The problem seems to have been particularly acute for domestic producers – Sempermed, their biggest competitor in Thailand, posted a double-digit growth in sales volumes during the same period.

Even so, Lim thinks the gulf between the Malaysian glove makers and their Thai, Indonesian or Chinese counterparts remains wide. “Labour in China and Thailand is no longer cheap, while Indonesia lags in terms of technology. Malaysia has raw materials and technology in its favour.”

He expresses confidence that domestic glove players can wean themselves off the largesse of national subsidies on petrol, electricity and gas, and still be competitive.

“Malaysia is not alone in facing rising costs. We should worry about our productivity instead,” he says.

Since last year, manufacturers have had to contend with cost pressures from the minimum wage and double-digit increases in gas and electricity tariffs.

Lim, however, remains undaunted. “I can’t be sitting here waiting. We are in the midst of optimising our consumption of raw materials and automating production,” he points out.

In a bid to refine its processes, the group is building new machines with faster output and revamping old lines to manufacture higher-margin products. A team is also looking into implementing Six Sigma, the efficient manufacturing concept popularised by General Electric’s Jack Welch.

Despite the various headwinds, Lim does not expect Kossan’s margins for its core rubber glove segment to dip into single-digit territory from around 15% as at end-2013.

“A 10% margin is what I would consider sustainable, especially given our large volume,” he explains.

Genesis

Lim, who studied chemical engineering in Singapore and then London, worked as a chemist upon his return to Malaysia.

He quit a year later to start a business selling cutless bearings, a type of technical rubber product (TRP), to the marine industry.

Lim made back his RM100,000 investment in the first year. That was circa 1979. Kossan has not turned in a loss since.

When the United States experienced a spike in demand for rubber gloves in the 1980s because of the HIV-AIDS outbreak, expanding into glove-making seemed a natural choice for Kossan.

So Lim travelled to Taiwan, which was then a leader in manufacturing examination gloves, and imported the technology and equipment to Malaysia. The rest is history.

Kossan is today Malaysia’s largest producer of TRP, accounting for 12% of group sales.

Its TRP division had last year secured a job to supply 2,000 pieces of seismic bearings to the newly opened second Penang bridge to help prevent earthquakes.

Although sales of rubber gloves number in the hundreds of billions, Lim stresses that for Kossan, at least, “it’s not a volume game”.

“If I have to compete on price, then I’m not interested. I will not put fillers or rubbish into my gloves to sell them cheap. That will just erode their barrier quality.

“It is unacceptable to me. Gloves must protect people,” explains Lim, who has a 51.22% stake in Kossan.

Glove tycoon

In the 1980s, Lim recalls buying his first laptop for close to RM13,000, a clunky machine with a speed of eight hertz. Their modern incarnations cost a few thousand ringgit and come with much better computing power. “This is how we should use technology to make things not only better, but more affordable,” Lim says.

He bristles at the suggestion that he is a “rubber glove tycoon”. “I don’t like that sort of statement. Success is temporary – if you get comfortable. You may be No. 1 today. It doesn’t mean you will be No. 1 tomorrow.

“But you could also be small today and big tomorrow. The market is cyclical,” Lim observes.

Instead of the day-to-day operations, which he leaves to his managers, Lim says he spends most of his time studying global trends and charting Kossan’s future direction.

His goal is to build a company that can “run on autopilot”, which means it has solid systems and can keep on driving itself.

“Once this is in place, no one is indispensable. We won’t go kaput just because we lose a few key staff,” he quips.

The gregarious 62-year-old says he is sometimes asked if he is tired.

“My reply is no. And they tell me, ‘Lim, you’re so big now’. I don’t feel that way. In my mind, there is so much we can still do.

“I’m a technical man and I like challenges. The more difficult it is, the more I have the fighting spirit.”

Source: The Star
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Re: Kossan Rubber Industries

Postby winston » Mon Jul 25, 2016 6:26 pm

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The best of the lot

Despite having no new capacity in FY16, we expect yoy earnings growth of 12% to be underpinned by 12-month contribution from its two plants that started up in 2015.

The group also recently announced the patent of its nitrile accelerator-free glove.

The current limited availability could lead to a slight premium in ASPs.

The group’s upcoming new capacity expansion will cater to this new product.

We trim our earnings by 1.9-2.5% for FY16-18F. Our target price falls to RM7.60.

Kossan remains the top pick of the sector.

Source: CIMB

https://brokingrfs.cimb.com/3_3AvG8r2aC ... HUdPg2.pdf
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Re: Kossan Rubber Industries

Postby winston » Sun Feb 05, 2017 9:54 pm

DATUK LIM KUANG SIA
Flagship: Kossan Holdings
Net worth: RM2bil

LIM, 70, is the managing director and chief executive officer of Kossan Rubber Industries Bhd. He is a chemical engineer who started making rubber bearings and later gloves.

Kossan is one of Malaysia’s top-four manufacturers that control the world market for gloves. Its products are sold in over 160 countries, and virtually every hospital or medical clinic in the world would have used the company’s products.

Last year, Kossan’s share price fell by about 29%, thereby shaving off nearly RM1bil in value from RM9.30 a share to RM6.59.

He was the 17th richest man in Malaysia in 2015 with a net worth of RM3bil based on his and his family’s shareholding in Kossan.

The fall in the share price was led by the price war on glove products and the higher cost of raw materials.

Still, Kossan churns out close to 22 billion pairs of disposable gloves every year and will be adding three billion more this year since it invested in a facility last year. Kossan’s product mix is 70% nitrile and 30% natural rubber gloves.

The company also invested about RM35mil in a research and development centre last year, which will be opened in July this year.

The company’s first patented glove technology, the Low Derma Technology, protect users from developing allergies from latex protein and rubber chemical accelerators.

Lim and his family, Lim Kuang Wang, Lim Kuang Yong, Lim Kwan Hwa and Lim Leng Bung, are shareholders of Kossan Holdings (M) Sdn Bhd, which in turn has a 51.1% stake in Kossan. He and his family also have a direct 0.3% share in Kossan.

Kossan’s net profit was lower at RM126mil for the nine months ended Sept 30 from RM148mil in the same period a year ago.

Source: The Star
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Re: Kossan Rubber Industries / Lim Kuang Sia

Postby winston » Tue Jul 11, 2017 9:14 am

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Kossan is CIMB Research top pick for glove sector

KUALA LUMPUR: CIMB Equities Research is upbeat about Kossan Rubber Industries’ prospects and it is maintaining its Add with a higher target price of RM7.55, based on an unchanged 19 times CY18F price-to-earnings (P/E).

The research house said on Tuesday Kossan is the top pick in the glove sector, with valuations below its peers (Hartalega and Top Glove).

“We expect its share price to move higher in tandem with stronger earnings delivery, especially in 2H17F.

Downside risks: delays in expansion plans and stronger pricing competition,” it said.

CIMB Research recently hosted a meeting with Kossan’s management where 25 fund managers and buy-side analysts attended.

The bulk of the discussion was about its future, with the group revealing its expansion plans to drive earnings.

The decline in FY16 net profit to RM170.9m (-15.6% on-year) was due to a combination of external and internal factors.

In addition to stronger-than-expected pricing competition, Kossan suffered capacity loss (10%-12% of total capacity) from two factories that faced revamp works starting from 2Q16 to up to early-4Q16. Also, margins were hit by hikes in natural gas prices and minimum wages.

From 1Q17, Kossan recorded sequentially stronger performance (1Q17 net profit: +4.3% on-quarter) as total capacity reverted to normal.

“We expect Kossan to record stronger performance in FY17F, supported by a better 2H17F, with a new three billion pieces (of gloves) per annum plant beginning operations by July 2017. This is the first new plant to be added since December 2015, growing capacity to 25 billion pieces per annum (+13.6%).

“This timeline is ahead of our estimates as we had earlier projected for the new plant to only begin production in 4Q17F. This leads to earnings upside to our FY17F estimates,” it said.

Another two new plants (4.5 billion pieces per annum) to come onstream in FY18F Also, Kossan will add two new plants in FY18F with total capacity of 4.5 billion pieces per annum.

The first plant is slated for completion by 1Q18F and the second plant will begin operations in 3Q18F. Total capacity will rise to 29.5bn p.a. by 3QCY18F.

“We gather that all of its new plants have been earmarked to manufacture its patented accelerator-free nitrile gloves, with latest automation to be installed along with high-speed dipping manufacturing lines.

“Kossan will carry on conducting revamp works on its existing facilities to increase overall operating efficiencies.

“However, this will be conducted on a gradual basis to ensure production is not disrupted again. Revamp works include plans to utilise more automation in its production flow in a bid to increase cost savings and production output,” it said.

CIMB Research said with its new capacity coming on-stream earlier than expected, its FY17-19F EPS is adjusted higher by 2.2%-4.6%.

“Accordingly, our target price is raised to RM7.55 based on an unchanged 19 times CY18F P/E (+one standard deviation from its five-year mean),” it said.

Source: The Star

http://www.thestar.com.my/business/busi ... hcMuVJQ.99
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Re: Kossan Rubber Industries / Lim Kuang Sia

Postby winston » Mon May 27, 2019 9:19 am

Numbers speak louder than words
Results outperformed peers; maintain BUY

Strong 1Q19 results was ahead of expectations on higher margins.

Operating environment has also improved with the ASP pressure already subsided.

We raise FY19-21F EPS by 4-8% as we impute for its efficiency gains.

Consequently, our TP is raised to MYR4.70 (+8%), based on an unchanged 22x CY20 PER (mean). Trading at 12M fwd PER of 19x, valuation is undemanding (big-cap peers: 27-33x). BUY.

Source: Maybank

https://factsetpdf.maybank-ke.com/PDF/1 ... 3ea1f9.pdf
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Re: Kossan Rubber Industries / Lim Kuang Sia

Postby winston » Wed Jun 12, 2019 5:07 pm

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Kossan: Upgrade to BUY with a higher target price of RM4.50 (from RM3.70), based on 23x 2020F PE.

The PE yardstick is in line with the sector’s PE mean of 23x. We believe this is warranted as Kossan has the most visibility in capacity expansion growth of 43% in the near term (2018-20), thanks in due part to a low base (Hartalega: 39%, Top Glove: 34%).

Over time, we envision the faster growth against consistent execution to reinvigorate
Kossan’s valuations, catching up with peers.

Source: UOBKH
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Re: Kossan Rubber Industries / Lim Kuang Sia

Postby winston » Fri Jun 28, 2019 9:13 am

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Kossan remains our top pick for its:
(i) double-digit earnings growth potential;
(ii) biggest exposure to the non-medical segment and
(iii) undemanding 12-month forward 20x P/E vs its 5-year mean of 22x and large-cap peers’ 29-35x.

Source: Maybank
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Re: Kossan Rubber Industries / Lim Kuang Sia

Postby winston » Fri Jul 17, 2020 7:58 am

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Kossan’s main shareholder pares stake as share price continues to soar

by Lai Ying Yi

Source: The Edge

https://www.theedgemarkets.com/article/ ... inues-soar
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Re: Kossan Rubber Industries / Lim Kuang Sia

Postby winston » Thu Apr 13, 2023 5:41 pm

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JPMorgan said Kossan Rubber Industries Bhd is best positioned to weather the storm.

It said Kossan’s net cash stands at RM2 billion, making up about 57% of its market capitalisation.

“P/B remains palatable at 0.9 times, versus Top Glove (1.6 times) and Hartalega Holdings Bhd (1.4 times).

“Kossan avoided the reinvestment trap post-Covid supernormal profit, and presents upside risk should its cash be deployed intelligently. We maintain overweight,” it said.

Source: The Edge
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