Shares of Kossan Rubber Industries Bhd rose 23 sen or 3.4% to close at RM7.07, after the Employees Provident Fund (EPF) increased its stake in the glove manufacturer.
According to filings with Bursa Malaysia, the EPF currently owns about 42.94 million shares or 6.7% in Kossan. The fund has been gradually acquiring shares in the company since last month from 36.06 million shares or a 5.64% stake.
Year-to-date, Kossan’s share price has risen 58%. At the current share price of RM7.07, Kossan is trading at a historical price earnings (PE) ratio of 29.67 times with a market capitalisation of RM4.5bil.
Shares of rubber glove manufacturers have been on an uptrend since the beginning of the year on the back of a continuous strong US dollar.
According to a report by Maybank Investment Bank Research (Maybank IB), shares of glove producers have climbed substantially year-to-date, outperforming the FTSE Bursa Malaysia KL Composite Index or FBM KLCI by 45% on a relative basis.
Maybank IB has recommended a “buy” call on Top Glove Corp Bhd and Kossan, with target prices of RM9.10 and RM7.20, respectively. It has maintained a “hold” call on Hartalega Holdings Bhd, with an unchanged target price of RM8.50.
Affin Hwang Capital said prices for various commodities, including the nitrile and latex raw material, were expected to remain at low levels in the second half of this year, in line with weaker demand and oversupply issues.
It said the production cost denominated in ringgit is higher for natural gloves, which should result in the margin expansion of one to two points from higher currency gains, as both types of gloves are sold in US dollars.
“With the impending US rate hike for the third quarter of 2015, the ringgit could possibly weaken beyond the current 3.80 per dollar level,” it said in a report yesterday.
However, the research house noted that glove manufacturers which have a strong exposure in the nitrile glove segment have not benefitted as much from the stronger US dollar, due to stiffer pricing competition as more capacity is introduced in this segment. – The Star