OSK believe the worst is over for rubber gloves industry. This is on the basis that latex price expected to start on a downtrend. Since latex price makes up about 60% of rubber glove manufacturers’ total production cost, any decline would prompt an earnings and profit margin re-rating.
If the latex price does not decline, it will remain flat as the commodity’s scarcity would no longer be a concern, be it for genuine buyers or speculators due to slowdown in the Japanese automotive industry following the earthquake. This would result in lower tyre usage, which will result in more rubber being made available in the market.
Finally, since most of the rubber glove stocks have bottomed and their valuations have returned to single digit PERs, OSK recommended that investors take a re-look at these stocks. OSK top picks for the sector are Top Glove, Supermax and Kossan.
Below are the target prices and ratings for selected rubber glove stock.
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Luxchem Corporation Berhad was incorporated on 4 September 1991. It was listed in Bursa Malaysia Main Market on 27th June 2008 at an IPO price of RM1.10. The shares price drop to below 60 sen in the same year but start to recover in 2009.
The main activities of Luxchem are manufacturing and trading of unsaturated polyester resin and related products. They are also involved in importation and distribution of chemical and pertochemical products. Three of Luxchem’s subsidiaries are ISO9001:2000 certified.
Unfortunately, there is no coverage by research house on Luxchem for the latest Fair Value/Target Price. The last done was from CIMB Retail Research in July 2010 whose make a sell recommendation with a target price of RM1.15.
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Palm oil price continued to weaken with the improved production outlook in 2H thisyear. At the same time, exports have been weak, suggesting that the current palm oilprice is excessive and will inevitably lead to demand destruction.
OSK believes that palmoil price already hit a peak in the 2008 – 2011 upcycle and is now in a downcycle, whichwill last some 6 to 9 months at the very least. As there have been no fresh catalysts tospur palm oil price further, prices have to correct to a level where demand starts tokick in. Maintain Neutral on the sector with selective Buys.
Below are the target prices and ratings for selected plantation stock.
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OSK maintain OVERWEIGHT rating on construction sector, driven primarily by:
(i) implementation of the various projects under the ETP, and
(ii) the potential of more contract awards as the Govt attempts to generate a feel-good factor given the potential of an early General Election.
Gamuda, Mudajaya and KimLun are OSK’s top picks
Below are the target price for selected stocks in construction sector.
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Tambun Indah Land is a property developer based in Penang and it was listed on Main Market on 18th January 2011 at an IPO price of RM0.70. On listing day, share price hits RM0.865 but since then the price dwindling down to below its IPO price. On 23rd March 2011, share price close at RM0.675.
Fair Value/Target Price for Tambun by two research houses, RHB Research & Jupiter are at RM0.81 and RM0.95 respectively. However, the forecast may be not so accurate for a newly listed stock.
One interesting fact about Tambun is, they expected to pay high dividend to the shareholders. From IPO prospectus, Tambun have a dividend payout ratio policy in between 40% to 60% of the net profit.
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