Stock Name: KOSSAN
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Research House: MIDF
Kossan Rubber Industries Bhd
(April 22, RM7.93)
Reiterate trading buy at RM7.90 with unchanged target price of RM9.04: As expected, Kossan finally announced its long-anticipated proposed one-for-one bonus issue on April 21. This bonus issue is the fourth for Kossan since its listing in 1996.
Based on the company's track record, Kossan tends to make a bonus issue every three years. We have also stated in our previous reports that the corporate exercise is viable, after taking into account the fact that Kossan's retained earnings is 3.5 times its share capital.
Upon completion of the bonus issue, Kossan's issued and paid-up share capital shall be enlarged to RM159.9 million comprising 319.7 million shares of 50 sen par each, from 159.9 million shares as at Dec 31, 2009.
This exercise will not change our earnings forecast and the valuation on the stock but will help to improve the liquidity and the marketability of the shares. Besides, it is also a way to reward shareholders.
In order to facilitate the issuance of new shares resulting from the proposed bonus issue, as well as to cater for any future increases in the share capital of the company, Kossan has also proposed to increase its authorised share capital.
The proposed corporate exercises are subject to the approval from Bursa Malaysia and shareholders at the forthcoming EGM. The management expects the proposals to be completed by 3QCY10.
We are maintaining our earnings forecast for FY10 pending the completion of the exercise. We are also maintaining our trading buy recommendation on Kossan with an unchanged target price of RM9.04 (before adjusting for bonus issue), derived from 14 times earnings per share (EPS) FY10.
Kossan is our top pick for the glove sector, taking into account its discounted valuation as compared to its peers. Furthermore, we also expect a potential re-rating of the counter when investors regain confidence on Kossan after the fire incidents and forex losses last year. - MIDF Research, April 22
This article appeared in The Edge Financial Daily, April 23, 2010.
Company Name: KOSSAN RUBBER INDUSTRIES BHD
Research House: MIDF
Kossan Rubber Industries Bhd
(April 22, RM7.93)
Reiterate trading buy at RM7.90 with unchanged target price of RM9.04: As expected, Kossan finally announced its long-anticipated proposed one-for-one bonus issue on April 21. This bonus issue is the fourth for Kossan since its listing in 1996.
Based on the company's track record, Kossan tends to make a bonus issue every three years. We have also stated in our previous reports that the corporate exercise is viable, after taking into account the fact that Kossan's retained earnings is 3.5 times its share capital.
Upon completion of the bonus issue, Kossan's issued and paid-up share capital shall be enlarged to RM159.9 million comprising 319.7 million shares of 50 sen par each, from 159.9 million shares as at Dec 31, 2009.
This exercise will not change our earnings forecast and the valuation on the stock but will help to improve the liquidity and the marketability of the shares. Besides, it is also a way to reward shareholders.
In order to facilitate the issuance of new shares resulting from the proposed bonus issue, as well as to cater for any future increases in the share capital of the company, Kossan has also proposed to increase its authorised share capital.
The proposed corporate exercises are subject to the approval from Bursa Malaysia and shareholders at the forthcoming EGM. The management expects the proposals to be completed by 3QCY10.
We are maintaining our earnings forecast for FY10 pending the completion of the exercise. We are also maintaining our trading buy recommendation on Kossan with an unchanged target price of RM9.04 (before adjusting for bonus issue), derived from 14 times earnings per share (EPS) FY10.
Kossan is our top pick for the glove sector, taking into account its discounted valuation as compared to its peers. Furthermore, we also expect a potential re-rating of the counter when investors regain confidence on Kossan after the fire incidents and forex losses last year. - MIDF Research, April 22
This article appeared in The Edge Financial Daily, April 23, 2010.
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