Period 1QFY12/3MFY12
Actual vs. Expectations
Within our estimate and the consensus expectation.
The 1QFY12 net profit made up 22% and 21% of ours and the
consensus’ forecasts of RM127.1m and RM146m respectively.
Dividends No dividend was declared.
Key Result Highlights
QoQ, the EBITDA margin remained the same at 12% while
earnings were slightly lower by 1%. This
was mainly attributable to the higher average latex cost, which increased by 3%
QoQ to RM7.50/kg.
YoY, the turnover increased by 3% and earnings increased by
15% as the net profit margin improved from 10% to 12%. The higher margins were
mainly due to a lower latex cost, which had dropped by 27% YoY as well as
stronger demand from customers taking advantage of the lower average selling
prices now (-20% YoY) after a spike last year.
Outlook Maintain Neutral. Higher competition from the
glove segment may erode Supermax’s margins. However, as most players are
expecting a lower latex price, this should
limit the negative impact on its margins above.
Change to Forecasts
We are maintaining our earnings forecasts for FY12 and FY13.
Rating UPGRADE to OUTPERFORM
We are upgrading our rating to an OUTPERFORM from MARKET
PERFORM as the current share price now implies a 15% upside for the stock as measured
against our TP of RM2.06.
Valuation We maintain our targeted PER valuation
multiple of 11.0x on Supermax, as it is currently trading at its average
historical PERs of 11.0x-13.0x. Hence we are keeping our existing Target Price
of RM2.06.
Risks Higher latex price, and Stronger ringgit against US dollar.
Source: Kenanga
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