Karex / Goh Siang

[winston]

not vested

Condom manufacturer introduces ‘rendang’ edition in Malaysia to spice things up

Karex also has other brands under its portfolio which include Carex, Pasante and bespoke condom label called TheyFit.

Source: Today

https://www.todayonline.com/world/condo ... ice-things

[winston]

not vested

First quarterly loss since listing

9MFY6/19 core net profit of RM3.8m (-65.2% yoy) was below expectations.

Karex’s outlook remains challenging on the back of weak tender demand, and A&P expenses will likely remain high in a bid to drive greater OBM sales.

Maintain Reduce, with lower TP of RM0.30 (28x CY20F P/E).

Source: CIMB

https://brokingrfs.cimb.com/sA9UKpNTA0X ... O2QbA2.pdf

[winston]

not vested

Long road to recovery, with no end in sight

FY6/19 core net profit of RM3.4m was grossly below expectations at 61% of our and 65% of Bloomberg consensus’ full-year estimates.

Near-term earnings remain somber, on the back of expectations of weak condom sales as well as higher operating costs, especially labour.

Maintain Reduce, with a lower TP of RM0.29 (0.6x FY20 P/BV).

Source: CIMB

https://brokingrfs.cimb.com/1F6EzGhnjrv ... zzrpw2.pdf

[winston]

A steep path to recovery

We deem Karex’s 1QFY20 net loss of RM0.2m to be within expectations.

We expect stronger results ahead, mainly on the back of a recovery in tender condom sales, lower social compliance costs and decline in latex prices.

Maintain Reduce, with an unchanged TP of RM0.29 (0.6x P/B)

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 5D2ED2573B

[winston]

not vested

2QFY6/20: Better but not good enough

1HFY6/20 net loss of RM0.1m (-102% yoy) came in below expectations.

We expect Karex to record sequentially stronger quarters ahead, driven by higher commercial and tender volume and lower social compliance costs.

We reiterate our Reduce rating, with an unchanged RM0.29 TP (0.6x P/BV).

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 3E88864913

[winston]

not vested

Trading Buy: KAREX-5247

Negatives priced in; Better quarters ahead
(Last price: RM0.495, Potential upside +26.3%)


Company Profile

Karex (listed in Nov 2013) is the largest condom producer by volume in the world (with ~20% market share). Its clientele consists of governments, NGOs, brand owners and retailers in over 140 countries around the world.


Trading Catalyst

Despite challenging operating environment, we believe Karex’s risk-reward profile is attractive and a lot of negatives appear to be priced in after tumbling 23% from a 52-week high of RM0.645 to RM0.495.

Current P/B of 1.05x is undemanding (-65% below 5Y mean of 3x), supported by 39% EPS CAGR from FY20-22.

We see better quarters ahead as
1) production capacity normalises post-MCO;
2) leverage on cost advantages via the implementation of automation and investment into OBM segment’
3) lesser social compliance costs on completion of final social audits; and
4) upward trending ASP since early 2020, further aided by coronavirus-led demand.

Technically, share price is likely to stage a technical rebound following the hammer candlestick formation to re-challenge the RM0.555-0.60 upside targets.


Technical View
Resistance: RM0.510 / RM0.555 / RM0.625
Support: RM0.465 / RM0.450
Cut loss: RM0.445

Key Financial Stats
Trading at 1.05x P/B (-65% vs 5Y mean 3x), supported by 39% EPS CAGR from FY20-22

Source: Bloomberg, HLIB

[winston]

not vested

3Q, 2020

Revenue: +16%
RNAV: 0.47

https://www.bursamalaysia.com/market_in ... id=3054327

[winston]

not vested

Worst is over, but fairly-priced at this point

FY6/20 core net profit of RM3.8m (+10.4% yoy) beat estimates.

We expect Karex to record stronger results going forward, driven by:
i) higher sales volume
ii) increase in condom ASPs and
iii) better cost control.

Upgrade to Hold, with a higher TP of RM1.10 (28x CY22F P/E).

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... A70A52E5E2

[winston]

not vested

CGS-CIMB upgrades condom maker Karex to ‘add’, says GP stake buy earnings accretive

by Arjuna Chandran Shankar

KUALA LUMPUR (Nov 13): CGS-CIMB Securities Sdn Bhd said today it upgraded condom maker Karex Bhd shares to "add" from "hold" with an unchanged target price (TP) of RM1.10 after Karex announced yesterday the group’s proposed acquisition of the remaining 30% stake in 70%-owned subsidiary Global Protection Corp (GP) for RM42.26 million.

In a note today, CGS-CIMB analyst Walter Aw said the research firm views the acquisition positively given its earnings accretive nature.

Yesterday, Karex said the acquisition by its wholly-owned subsidiary Karex Global Ltd (KG) will be financed entirely via issuance of up to 82.93 million new shares in Karex at an issue price to be determined later.

Today, Aw said although the deal will enlarge Karex’s share base, CGS-CIMB estimates it will still lift Karex’s earnings per share by 1.9% to 4.7% in financial years ending June 30, 2021 (FY21) to FY23.

"This is assuming that GP’s FY21-23F net profit would be flat at RM10.7 million (30% stake: RM3.2 million), which is conservative, given its two-year revenue/net profit CAGR (compound annual growth rate) (FY18-20) of 10.8%/915%.

"As the share price [of Karex] has corrected 27.5% since our last report (Aug 25), our upgrade is backed by:
i) its robust earnings prospects (three-year EPS CAGR of 131.1%) driven by more favourable supply-demand dynamics;
ii) its established own-brands in the condom market; and
iii) its position as the largest condom maker globally (in terms of production capacity),” Aw said.

Meanwhile, Hong Leong Investment Bank Bhd (HLIB) analyst Farah Diyana Kamaludin wrote in note today that HLIB expects Karex's 100% ownership of GP to contribute positively to the earnings of Karex.

"While the acquisition would help plug MI (minority interest) leakage, we estimate that [Karex's] FY21-22 EPS would be diluted by 3% and 2% post share issuance.

"We keep our [Karex earnings] forecasts pending completion of the acquisition. We maintain 'buy', with unchanged TP of RM1.20 [for Karex shares]," Farah Diyana said.

Source: The Edge

https://www.theedgemarkets.com/node/541181

[winston]

not vested

Primed for a turnaround

Karex announced Thursday a proposal to acquire the remaining 30% stake in 70%-owned Global Protection for RM42.3m (13.2x FY6/20 P/E).

We view this positively given the earnings accretive nature of the proposed acquisition and operational synergies to its business.

Upgrade Karex to Add with unchanged TP of RM1.10 (28x CY22F P/E).

Source: CIMB

https://rfs.cgs-cimb.com/api/download?f ... 37D06766E8