KUALA LUMPUR: CIMB Equities Research is maintaining its Outperform recommendation on Kossan following its RM9.3 million acquisition of 51% of Cleanera HK while its target price remains RM5.41.
CIMB Research said on Thursday, March 24 this was a nice surprise as it will enable the company to diversify beyond medical examination gloves into the cleanroom segment.
Also, Cleanera's distribution network in Asean will give Kossan an opportunity to expand its operations in Asean. If the acquisition materialised, it would be transacted at a lower P/BV multiple of 2.0x than the 2.7x average that the listed glovemakers currently fetch.
'We make no changes to our earnings numbers as no details have been released and the purchase agreement is outstanding.
'Our target price remains RM5.41, still based on a forward P/E of 10.2x or a 30% discount to Top Glove's target P/E of 14.5x. Kossan remains an OUTPERFORM, with the re-rating catalysts being 1) contract wins, 2) cost savings from upstream M&A and 3) higher nitrile sales,' it said.
CIMB Research said on Thursday, March 24 this was a nice surprise as it will enable the company to diversify beyond medical examination gloves into the cleanroom segment.
Also, Cleanera's distribution network in Asean will give Kossan an opportunity to expand its operations in Asean. If the acquisition materialised, it would be transacted at a lower P/BV multiple of 2.0x than the 2.7x average that the listed glovemakers currently fetch.
'We make no changes to our earnings numbers as no details have been released and the purchase agreement is outstanding.
'Our target price remains RM5.41, still based on a forward P/E of 10.2x or a 30% discount to Top Glove's target P/E of 14.5x. Kossan remains an OUTPERFORM, with the re-rating catalysts being 1) contract wins, 2) cost savings from upstream M&A and 3) higher nitrile sales,' it said.
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