Hong Leong Investment Bank (HLIB) Research has placed a "hold" call with a target price of RM3.19 on Kossan Rubber Industries Bhd, the world's third largest glove maker in terms of
production capacity.
The research house said the rubber company's intention of maintain a balanced a 50:50 product mix of natural rubber and nitrile gloves, would allow it to shield itself from shifts in demand for either type of gloves.
"Balance product mix will allow Kossan to cater to both markets and mitigate risks from sudden price hikes in either nitrile or natural rubber latex," HLIB Research said in a research note.
The research firm also said other catalysts included Kossan's initiative on working towards fully automating and upgrading its older manufacturing processes, focusing on higher margin products and Kossan's plan to venture upstream by acquiring rubber plantation land.
However, HLIB Research said that the risk placed on the company was a spike in latex prices and the weaker greenback against ringgit.
"We believe Kossan has been a sector laggard due to its lack of
specialisation (of being a nitrile or natural rubber glove, or original brand manufacturing player)," the research house said. -- Bernama
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