Karex / Goh Siang

Karex / Goh Siang

Postby winston » Thu Oct 30, 2014 7:09 pm

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RHB Research maintains Buy on Karex

KUALA LUMPUR: RHB Research has maintained its Buy call on Karex with a target price of RM3.43 pegged to a 20 times CY15 P/E and implying a 19.5% upside.

"The company’s expansion plans remain intact and it is operating in a favourable environment. Its capacity expansion could drive organic growth, while its acquisition of Global Protection may elevate group earnings via the own brand manufacturing (OBM) segment," it said.

Karex’s organic growth remains intact, spurred by its capacity expansion. It has achieved an annual production capacity of four billion pieces in FY14 (Jun) and its expansion is on track to meet its five billion and six billion pieces per annum target by FY15 and FY16 respectively.

"In view of the strong demand in the condom industry, we are confident that its additional capacity will be taken up," it noted.

It said that market experts believe that demand for condoms may hit 30.4 billion pieces per annum in 2016 and forecast that by 2018, condom demand could grow to 38.2 billion pieces per annum.

Apart from being used for family planning, condoms are in high demand in countries with high HIV prevalence rates (particularly African countries), which are still facing shortages of condoms, it said.

Early this month, Karex completed the first tranche of its acquisition of Global Protection (GP), which entails a 55% stake in the latter with a cash consideration of US$6.6mil.

"We deem the acquisition attractive as the valuation is relatively fair, while GP should open a new chapter for Karex to expand its OBM division.

"ONEbrand from GP is a top-four condom brand in the US and Karex believes the potential market in Asia is huge. We did a simple illustration on how Karex can improve its earnings through expansion in its OBM segment," it said.

Source: The Star
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Re: Karex

Postby winston » Wed Dec 10, 2014 1:15 pm

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In the past two days, Karex’s share price bucked the local bourse’s downtrend, rising 5.6% to RM3.20 on the back of a ten-fold spike in volume. It is unclear what sparked the sudden interest, although there are, recently, positive analyst reports on the counter.

Listed just slightly over a year ago, in November 2013, Karex prides itself as the largest condom manufacturer in the world by capacity. The company manufactures, primarily, for commercial global brand owners, government and non-government agencies.

The recent release of its 1QFYJune15 financial results saw the company’s revenue growing 7.2% y-y to RM70.1 million. Net profit rose an outsized 26.7%. Karex attributes the improved margins to economies of scale on higher volume condom sales and better product mix. The company also benefited from softer latex prices, its key raw material. Latex prices have been trending down this year and are now at five-year lows, the result of supply glut.

Karex will also benefit from the strengthening of the US dollar vs the ringgit, as the bulk of its sales are destined for overseas markets and denominated, mainly, in the greenback.

Aside from organic capacity expansion, Karex recently announced the proposed acquisition of 55% equity interest in Global Protection Corp. (“GP”) for a cash consideration of US$6.6 million. GP is the owner of the ONE brand condoms, the fourth largest brand in the US with access to more than 25,000 stores in the US and Canada.

The company is sitting on net cash of RM65.9 million. It declared a final single-tier dividend of 2.5 sen per share, translating into net yield of 0.8%. The stock trades ex-entitlement on the 10th of December.

Valuations are, however, relatively expensive – at 5.3 times book value and trailing 12-month P/E multiple of 26 times.

Source: The Edge
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Re: Karex

Postby winston » Sun Jan 03, 2016 8:46 am

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KAREX BHD

THE largest condom manufacturer in the world is all set for 2016 with the expansion of its own brand manufacturing (OBM).

The segment provides Karex with margins 10% higher than its original equipment manufacturing segment. If the company succeeds in bringing in more OBM revenue, its profit margins would increase.

Singapore and Thailand will play a part in OBM contributions next year as the company aims to start introducing the ONE brand there in 2016.

The company is also on a capacity drive with expectations to achieve six billion pieces by December 2016 and seven billion in 2017. It is currently reaching its fifth billion capacity, also fuelled by its recent acquisition of condom manufacturer Medical-Latex (Dua) Sdn Bhd.

Although Karex is currently trading at a price-earnings (PE) multiple of 43 times its earnings, analysts still see the stock performing due to favourable exchange rates, low raw material prices as well as its potential to grow its OBM segment.

Three out of seven research house have a “buy” rating on Karex, with Nomura Research having the highest target price of RM5 on the stock. Three other houses have “hold” calls, while one research house has an “overweight” call on the stock. Consensus’ target price on Karex is at RM4.30.

Year-to-date, Karex shares have risen almost 84% to RM4.13.

Source: The Star
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Re: Karex

Postby winston » Mon Sep 19, 2016 7:14 pm

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Karex Berhad – Acquisitions to drive OBM segment

Karex’s presentation was mainly centered on its four acquisitions in FY16.

The group intends to grow its own brand segment (OBM) more aggressively through these acquisitions while tapping into various markets (which the group previously had minimal exposure to).

Karex’s management also highlighted its earnings prospects for FY17 which are:
i) a recovery in tender market volume, especially in 2HFY17, and
ii) growing OBM contributions organically as well as through these acquisitions.

We understand that the group has also recently secured a US$5m contract to supply Walmart with One brand condoms, which
should start contributing to earnings from 2QFY17.

As for the recent Zika virus outbreak in Malaysia, the group indicated that it has not seen a surge in demand for condoms for the entire year despite the Zika virus outbreak in Brazil in May 15.

However, if the virus spreads to high density population areas such as the US, the group does not discount the possibility of
a spike in demand and it will have no issues with coping with any sharp increase in demand.

Source: CIMB
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Re: Karex

Postby winston » Wed Sep 28, 2016 8:52 am

Karex likely to meet target

Affin Hwang maintains ‘hold’ call on condom manufacturer

KAREX BHD

By Affin Hwang Investment Bank

Hold (maintained)
Target Price: RM2.50

KAREX’s expansion of its own-brand manufacturing (OBM) and rising volumes are expected to meet the 20% top-line contribution target by 2020, according to Affin Hwang Investment Bank.

While the world’s largest condom manufacturer has thrived under the original equipment manufacturer (OEM) model, Karex has been hit by rising production costs, drop in labour productivity, selling prices reduction and lower margins.

The transition to the OBM business model (although not entirely) is expected to enhance Karex’s earnings base. Karex’s OBM contribution doubled from 4% to 9% over FY2014-16, as its ONE brand has gained momentum in Malaysia and Singapore, and expands to Europe and Asia-Pacific.

Despite the gradual transition into OBM, Karex’s business model will still be dominated by OEM and command more than 90% of its topline.

“The OEM segment remains relevant, and should continue to underpin Karex’s organic growth in tandem with its capacity expansion and ensuring healthy utilisation rate,” Affin Hwang said in its report.

The research house’s projection implies an average core net profit margin of 20% for FY2017-19, a slight step-up from the historical average of 18%. Gearing-wise, Karex remains in a comfortable net cash position in excess of RM80mil post the acquisition of Line One.

While more mergers and acquisitions could be on the cards, the management indicated that they are comfortable after several major acquisitions over the past few months and will now focus on consolidating the multiple brands and working to achieve the projected synergies.

“We maintain ‘hold’ on the stock with an increased 12-month target price of RM2.50. We project 17% earnings compound annual growth rate for Karex for FY2017-21, premised on capacity increase, average selling price improvement and OBM segment expansion.

Source: The Star
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Re: Karex

Postby behappyalways » Fri Oct 28, 2016 1:59 pm

Inside the world's largest condom maker
http://money.cnn.com/video/news/2016/10 ... index.html
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Re: Karex

Postby winston » Wed Nov 30, 2016 9:11 am

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The One to put on

1QFY17 net profit plunged 63.5% yoy to RM8.1m, below expectations, accounting for 11% of our and 10% of Bloomberg consensus FY17 estimates.

The weaker performance was due to:
i) deferment of orders amounting to RM13m,
ii) weaker tender market demand, and
iii) higher operating costs.

OBM business saw strong growth, and contributed 13% to 1QFY17 revenue.

The current weak ringgit environment bodes well for Karex, given its exportorientated status. Expect boost from currency gains in the following quarters.

Upgrade to Add, with a higher target price of RM2.80.

Source: CIMB

https://brokingrfs.cimb.com/TtRp8UIjYFp ... XMHOw2.pdf
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Re: Karex

Postby winston » Sun Feb 05, 2017 10:22 pm

GOH SIANG & family
Flagship: Karex Bhd
Net worth: RM1.362bil

The Goh family made their fortune from the production of condoms.

Last year, the largest condom manufacturer in the world providing about 15% of the world’s supply, signed an asset purchase agreement with TheyFit to acquire the company’s intellectual property rights for US$1.3mil (RM5.5mil).

The purchase comes with approvals from the Food and Drug Administration of the United States, which allows Karex to increase its market share in the US.

Karex, which is majority-owned by Goh Siang and his family, has thrived under the original equipment manufacturer (OEM) model.

However, it has been recently hit by rising production costs that caused margins to erode in 2016.

The purchase of intellectual property rights enhances its venture into its own-brand manufacturing business model (OBM) and is expected to enhance Karex’s earnings base.

Its ONE brand has gained momentum in Malaysia and Singapore, and is expanding to Europe and Asia Pacific. Despite the gradual transition into OBM, Karex’s business model is still dominated by OEM works that contribute more than 90% of its top-line.

While more mergers and acquisitions could be on the cards, the management has indicated that they are comfortable after several major acquisitions over the past few months and will now focus on consolidating the multiple brands and working to achieve the projected synergies.

Last year also saw the entrance of Karex into Forbes Asia’s “Best Under A Billion" list.

Source: The Star
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Re: Karex / Goh Siang

Postby winston » Thu Feb 09, 2017 10:10 am

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Short term pain, long term gain to be the ONE

2QFY6/17 results will be released on 24 Feb. We think they are likely to be sequentially stronger, but may fall below expectations due to one-off expenses.

ONE products will be sold in one of UK’s largest health and beauty chains soon, a testament to their marketability. However, expect minimal contributions near term.

Management has hedged forward a significant portion (~70-80%) of its latex needs up to Mar 17 at RM5-5.30/kg, alleviating concerns on impact of higher latex prices.

Maintain Add, with lower TP of RM2.65. We lower our FY17-19F EPS by 0.9-9.5% to account for higher latex prices and marketing expenses

Source: CIMB

https://brokingrfs.cimb.com/NHwf-vF7v7h ... ADzIQ2.pdf
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Re: Karex / Goh Siang

Postby winston » Wed May 31, 2017 4:40 pm

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Karex falls to March 2015 low after lower core earnings

Karex remains a Hold for its growing original brand manufacturer segment, but near-term earnings growth is unlikely to be exciting

KUALA LUMPUR: Condom and rubber products manufacturer Karex fell to an early low of RM1.83 – lowest since March 2015 – on Wednesday after its near-term earnings growth was seen unlikely to be exciting.

At 11am, it was down 19 sen to RM1.86. There were 7.42 million shares done at prices ranging from RM1.83 to RM2.

Affin Hwang Capital Research lowered its discounted cashflow derived 12-month target price for rubber products manufacturer Karex to RM1.90 after lowering its margin assumptions.

It said that despite firmer sales volumes and demand, its core net profit fell 28% sequentially on lower average pricing and higher operational expenses.

“We lower our discounted cashflow-based 12-month target price to RM1.90 (from RM2.20) after incorporating our earnings cuts, which are somewhat offset by rolling forward our investment horizon.

“Karex remains a Hold for its growing original brand manufacturer segment, but near-term earnings growth is unlikely to be exciting.

Upside risk: better-than-expected recovery in tender orders.
Downside risk: higher-than-expected marketing costs,” said the research house.

Source: The Star

http://www.thestar.com.my/business/busi ... VPZ01gB.99
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