COMMENTS ON KOSSAN RUBBER INDUSTRIES BERHAD (7153)

FIGURE 1: KOSSAN RUBBER INDUSTRIES BERHAD LAST 5 YEARS SHARE PRICE TREND

**analysis based on 2018 annual report.

1.       GENERAL INTRO: Kossan Rubber is one of the major glove manufacturers in Malaysia.

2.       NOTABLE POINTS:

a.       According to 2018 annual report, there are three main business segments, glove (87.6%) brings in the most revenue, followed by technical rubber products (8.6%) and cleanroom products (3.8%)

b.      Expansion of production capacity in progress to reach a total of over 32 billion pieces per annum.

3.       IS THIS COUNTER A STRONG GROWTH STOCK? 

a.       REVENUE RANGE (million): ~2140 million in 2018 annual report, this is a high revenue company.

b.      SHARE PRICE: from 2015-2019, share price dropped significantly in 2018 due to stock splitting. Most of the time share price steady at around RM4

c.       EARNING PER SHARE (EPS): earning per share in last 5 years increased by around 37% from 11.38 to 15.62 sen, indicating a good growth potential of this counter

d.      FUTURE POTENTIAL/PROSPECTS: quite dependable and reliable counter, share price expected to be stable.

e.      CAPITAL EXPENDITURE (CAPEX): spending on purchase of new fixed assets is RM 314 million, around 14% of total assets, due to factories expansion.

4.       IS THIS A STRONG DIVIDEND STOCK?     

a.       DIVIDEND YIELD: in 2018 report, Kossan Rubber declared a total dividend payout of 6 sen per share, amounts to dividend yield of 1.43 % based on current share price.

b.      CONSISTENCY: consistent dividend payout, last five years (2014-2018) dividends declared range from 4 to 6 sen per share.

c.       DIVIDEND PAYOUT RATIO: in 2018 financial year, Kossan Rubber paid out about 38.4% of its earnings to investors in the form of dividend.

5.       IS THE MANAGEMENT PERFORMANCE GOOD?

a.       RETURN ON EQUITY (ROE): in 2018 financial year, Kossan Rubber achieved a good return of shareholders’ equity, at 15.24%. Last five year ROE maintained in the range of 15 to 21%.

b.      COST-TO-INCOME RATIO: cost-to-income ratio is quite high at about 759%, but lower than Top Glove, which reported a cost-to-income ratio of about 1000%

6.       OTHER INDICATORS:

a.       CASH FLOW: cash flow is positive, around RM 146.3 million, equivalent to RM 0.11 per share

b.      SUPPORT BY INSTITUTIONAL INVESTORS: this counter is well supported by institutional investors, there are 30 institutional investors at top 30 major shareholders list, including EPF (7.7%), Kossan Holdings Sdn Bhd (51.06%), Kumpulan Wang Persaraan (2.2%), Lembaga Tabung Haji (0.37%), Amanah Saham Bumiputera (0.66%), SOCSO (0.5%) and few insurance companies and investment funds.

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