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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Felda Global Ventures Holdings Sdn Bhd, the commercial arm of the Federal Land Development Authority (FELDA), plans to list five (5) of its subsidiary in Bursa Malaysia. CIMB and Maybank Investment Bank will be arrange these IPOs.
The fist IPOs will be its sugar operations, Malayan Sugar Manufacturing (MSM) which plan to be listed this year. MSM IPOs may raise more than RM1 billion. This could also make it one of the biggest IPOs for the year.
The IPOs will help Felda Global to fund its expansion. It plans to expand by buying land abroad in countries like Indonesia and probably as far as Africa, where oil palm trees originally came from.
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Last month, Bank Rakyat received an approval from Bank Negara to increase its share capital by additional one billion units to three billion units. Cooperatives and Bank Rakyat members will be given priority in subscribing to the new shares.
Currently, there is a long waiting list for the share subscription with the demand value exceeding RM1 billion. High demand for the Bank Rakyat shares is due to its excellent performance. Bank Rakyat manage to maintain 15 percent annual dividend since 1999.
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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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