Stock Name: SUPERMX
Company Name: SUPERMAX CORPORATION BHD
Supermax Corp Bhd
(Aug 23, RM2.97)
Maintain buy at RM3.11 with revised fair value of RM5.50 (from RM5.90): Supermax's 1HFY11 results were below consensus and our expectations, making up 35% and 41% of the FY11 forecasts. We believe the main causes of the feeble numbers were the continuously high latex price despite the wintering season having ended, as well as the weakening of the US dollar against the ringgit, which affected all exporters including Supermax. We think there was still a time lag of one to three months before Supermax could pass on the latex cost increases to its customers. Only about 70% to 80% of the higher cost was eventually passed through because the supply of examination gloves had caught up with demand, reducing suppliers' pricing power while the bargaining power of customers increased. Other than that, we note that there was an exceptional item in 2QFY11 amounting to RM4 million, being investment bonds being written off due to repayment default. Excluding this item, the company's 2QFY11 net profit would have increased by 9.3% q-o-q to RM26.7 million.
We downgrade FY11/FY12 earnings by 7% to factor in the poorer-than-expected 1HFY11 results.
Our fair value for Supermax has been downgraded to RM5.50 (previously RM5.90), based on the existing price-earnings ratio (PER) of 13 times FY12 earnings per share following our FY12 earnings downgrade. Having said that, we continue to like the company's attractive valuation (trading at single-digit PER valuation) as well as the nature of its business, which is recession-resilient. ' OSK Research, Aug 23
This article appeared in The Edge Financial Daily, August 24, 2011.
Company Name: SUPERMAX CORPORATION BHD
| Research House: OSK | Price Call: BUY | Target Price: 5.50 |
Supermax Corp Bhd
(Aug 23, RM2.97)
Maintain buy at RM3.11 with revised fair value of RM5.50 (from RM5.90): Supermax's 1HFY11 results were below consensus and our expectations, making up 35% and 41% of the FY11 forecasts. We believe the main causes of the feeble numbers were the continuously high latex price despite the wintering season having ended, as well as the weakening of the US dollar against the ringgit, which affected all exporters including Supermax. We think there was still a time lag of one to three months before Supermax could pass on the latex cost increases to its customers. Only about 70% to 80% of the higher cost was eventually passed through because the supply of examination gloves had caught up with demand, reducing suppliers' pricing power while the bargaining power of customers increased. Other than that, we note that there was an exceptional item in 2QFY11 amounting to RM4 million, being investment bonds being written off due to repayment default. Excluding this item, the company's 2QFY11 net profit would have increased by 9.3% q-o-q to RM26.7 million.
We downgrade FY11/FY12 earnings by 7% to factor in the poorer-than-expected 1HFY11 results.
Our fair value for Supermax has been downgraded to RM5.50 (previously RM5.90), based on the existing price-earnings ratio (PER) of 13 times FY12 earnings per share following our FY12 earnings downgrade. Having said that, we continue to like the company's attractive valuation (trading at single-digit PER valuation) as well as the nature of its business, which is recession-resilient. ' OSK Research, Aug 23
This article appeared in The Edge Financial Daily, August 24, 2011.
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