KAREX (5247) - Karex Berhad - Bonus issue went ex
Target RM3.05 (Stock Rating: HOLD)
Karex’s one-for-two bonus issue went ex on 16 April 2015. Post ex, our target price is adjusted to RM3.05, which is still pegged at 23.1x CY16 P/E (10% premium to Hartalega’s P/E). While we still like the company’s strong fundamentals, strong demand for its products and aggressive expansion plans that could translate into stronger earnings in the future, we think that Karex is fairly valued now, particularly after the dilution from its private placement. We maintain Hold on the stock. For rubber-related stocks, we recommend Kossan.
What Happened
Karex’s bonus issue went ex on 16 April 2015 with the issuance of 222.8m new bonus shares on the basis of one bonus share for every two existing shares. Post ex, our target price is adjusted to RM3.05.
What We Think
While it does not fundamentally change Karex’s prospects, the bonus issue is likely to boost the stock’s liquidity and improve the near-term trading sentiment. While higher liquidity should lift its share price, we think that Karex is fairly valued for now, particularly after the dilution from its private placement. Although we believe that the company will propose an acquisition soon as it had just completed its private placement exercise, the target company is likely to be a smallish company with strong growth potential. Hence, earnings impact to its bottomline would not be substantial. We also think contributions from new markets will not be felt so soon as it takes time for Karex to grow its sales in a new market.
What You Should Do
We advise investors to stay on the sidelines. We believe the current share price has factored in its strong earnings growth.
Source: CIMB Daybreak - 20 April 2015
Target RM3.05 (Stock Rating: HOLD)
Karex’s one-for-two bonus issue went ex on 16 April 2015. Post ex, our target price is adjusted to RM3.05, which is still pegged at 23.1x CY16 P/E (10% premium to Hartalega’s P/E). While we still like the company’s strong fundamentals, strong demand for its products and aggressive expansion plans that could translate into stronger earnings in the future, we think that Karex is fairly valued now, particularly after the dilution from its private placement. We maintain Hold on the stock. For rubber-related stocks, we recommend Kossan.
What Happened
Karex’s bonus issue went ex on 16 April 2015 with the issuance of 222.8m new bonus shares on the basis of one bonus share for every two existing shares. Post ex, our target price is adjusted to RM3.05.
What We Think
While it does not fundamentally change Karex’s prospects, the bonus issue is likely to boost the stock’s liquidity and improve the near-term trading sentiment. While higher liquidity should lift its share price, we think that Karex is fairly valued for now, particularly after the dilution from its private placement. Although we believe that the company will propose an acquisition soon as it had just completed its private placement exercise, the target company is likely to be a smallish company with strong growth potential. Hence, earnings impact to its bottomline would not be substantial. We also think contributions from new markets will not be felt so soon as it takes time for Karex to grow its sales in a new market.
What You Should Do
We advise investors to stay on the sidelines. We believe the current share price has factored in its strong earnings growth.
Source: CIMB Daybreak - 20 April 2015
