Technical | Fundamental Analysis Discussion Stocks Listed In Bursa

Monday, January 5, 2009

KOSSAN / Composite Index 02/01/2009 / 综合指数 2009年 01月 02日

Kossan Rubber Industries >>> Truly Recessions Proof By ZHUGE LIANG

Kossan was listed on Bursa Malaysia’s Second Board in 1996 before being upgraded to the Main Board in 2003. Based in Klang, Kossan is basically involved in manufacturing latex gloves and technical rubber products (TRP).

With an annual capacity of 9bn pieces, Kossan is the third largest glove producer in Malaysia and also worldwide. The company manufactures rubber-based products such as premium grade medical gloves, moulded rubber and extruded rubber. Today, it exports to more than 50 countries worldwide, with the US and Canada as its largest markets, accounting for 55% of total revenue. Given the nature of its business, we believe Kossan will still turn in an outstanding performance despite the global economic downturn.

Top Glove, Supermax and Kossan presently dominate the domestic latex glove industry. Kossan derives about 75-80% of its earnings from latex gloves, which are all for export markets. As Kossan’s management prefers to focus on high-end gloves, it exports more than 80% of its latex gloves to developed markets such as the US/Canada, EU, Australia and Japan. The TRP segment only contributes about 15-20% to Kossan's revenue.

Latex is the main raw material used in production making up over half of total production cost. Other major cost components include energy (12%), labour (9%), packing (8%), and chemical (8%).The glove industry currently faces the issue of rising latex costs. But followed by the global economy downturn, oil price had dropped. Rubber / latex price movement has 90% affect by oil price. And now we can see the cost of Kossan is lower..

Positive earnings growth
Kossan expected to register net earnings of RM60.6m and RM75.9m for FY08 and FY09 respectively. On the other hand, ROE will be strong at above 20% over the next few years and Kossan expected net earnings to grow at a CAGR of 17.5% for the next 3 years

Valuation is cheap
The stock is currently trading at an undemanding forward PER of 6.2x and 5.0x for FY08 and FY09 respectively. The target price is unchanged at RM4.60 by applying a composite of 10x PER and 2.0x P/BV and over an FY09 EPS of 47.5 sen and BV/share of RM2.28. Its strong earnings growth and cheap valuation gives investors a good opportunity to accumulate on weakness. We see Kossan as a good long term investment at this moment.

Kossan >>> Earning driven, FA wise & better than Top Glove / Supermax

Although it's oledi up abt RM0.40 but still Chart wise, not much resistance, fractal resistance seen @ RM3.60

Mantain : BUY Target RM4.60


Composite Index Daily Technical Analysis 02/01/2009

As indicated by A, the KLCI broke above the 887 resistance level after being supported by the Bollinger Middle Band dynamic support. Therefore, the immediate support for the KLCI is now at 887 level and the next resistance is at 900 psychological level.

As shown on the chart, the Bollinger Bands width has not expanded. If the Bollinger Bands Width should expand with the KLCI above the Bollinger Middle Band, it would be a clearer bullish biased signal.

As indicated by B, total market volume increased 63%, reaching the 40-day VMA level at last. This shows that the market participation has improved, and if the volume should remain above the 40-day VMA level, chances for the KLCI to continue its bullish biased movement would be higher.

As circled at C, the MACD line is now breaking above the zero level for the first time since May 29th 2008, suggesting an improvement of the longer term movement. Provided that the MACD line is still rising above the zero level, the market movement of the KLCI is expected to stay positive.

In short, the KLCI had a good start for the year 2009, and coupled with the Chinese New Year effect, the immediate outlook for the KLCI is bullish biased, but still too soon to declare a bull run, because the KLCI is still below the 200-day moving average line.

综合指数 2009年 01月 02日
如图中箭头A所示,综合指数在布林中频带(Bollinger Middle Band)获得扶持后上扬,突破了887点的胜图自动费氏线,所以887点反过来成为了综指的支持水平,综指当前的阻力水平为900点的心理阻力水平。

如图所示,布林频带(Bollinger Band)还未真正的打开,所以若布林频带接下来开始明显的打开,那综指将确认出现一个上扬的趋势,惟综指必须继续的维持在布林中频带以上。换句话说,综指接下来出现上扬的机会高,不过这都要等到布林频带是否打开来确定。




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