KUALA LUMPUR: RHB Research has maintained its Buy call on Karex with a target price of RM3.43 pegged to a 20 times CY15 P/E and implying a 19.5% upside.
"The company’s expansion plans remain intact and it is operating in a favourable environment. Its capacity expansion could drive organic growth, while its acquisition of Global Protection may elevate group earnings via the own brand manufacturing (OBM) segment," it said.
Karex’s organic growth remains intact, spurred by its capacity expansion. It has achieved an annual production capacity of four billion pieces in FY14 (Jun) and its expansion is on track to meet its five billion and six billion pieces per annum target by FY15 and FY16 respectively.
"In view of the strong demand in the condom industry, we are confident that its additional capacity will be taken up," it noted.
It said that market experts believe that demand for condoms may hit 30.4 billion pieces per annum in 2016 and forecast that by 2018, condom demandcould grow to 38.2 billion pieces per annum.
Apart from being used for family planning, condoms are in high demand in countries with high HIV prevalence rates (particularly African countries), which are still facing shortages of condoms, it said.
Early this month, Karex completed the first tranche of its acquisition of Global Protection (GP), which entails a 55% stake in the latter with a cash consideration of US$6.6mil.
"We deem the acquisition attractive as the valuation is relatively fair, while GP should open a new chapter for Karex to expand its OBM division.
"ONEbrand from GP is a top-four condom brand in the US and Karex believes the potential market in Asia is huge. We did a simple illustration on how Karex can improve its earnings through expansion in its OBM segment," it said.
http://www.thestar.com.my
"The company’s expansion plans remain intact and it is operating in a favourable environment. Its capacity expansion could drive organic growth, while its acquisition of Global Protection may elevate group earnings via the own brand manufacturing (OBM) segment," it said.
Karex’s organic growth remains intact, spurred by its capacity expansion. It has achieved an annual production capacity of four billion pieces in FY14 (Jun) and its expansion is on track to meet its five billion and six billion pieces per annum target by FY15 and FY16 respectively.
"In view of the strong demand in the condom industry, we are confident that its additional capacity will be taken up," it noted.
It said that market experts believe that demand for condoms may hit 30.4 billion pieces per annum in 2016 and forecast that by 2018, condom demandcould grow to 38.2 billion pieces per annum.
Apart from being used for family planning, condoms are in high demand in countries with high HIV prevalence rates (particularly African countries), which are still facing shortages of condoms, it said.
Early this month, Karex completed the first tranche of its acquisition of Global Protection (GP), which entails a 55% stake in the latter with a cash consideration of US$6.6mil.
"We deem the acquisition attractive as the valuation is relatively fair, while GP should open a new chapter for Karex to expand its OBM division.
"ONEbrand from GP is a top-four condom brand in the US and Karex believes the potential market in Asia is huge. We did a simple illustration on how Karex can improve its earnings through expansion in its OBM segment," it said.
http://www.thestar.com.my
