KUALA LUMPUR: RHB Research has maintained its Buy call on Karex with a target price of RM3.89 based on 20 times FY16F, a slight discount to Hartalega
’s 21 times.
"We think this is justified considering Karex’s leadership in the condom market as well as an expected three-year FY14-17F EPS CAGR of 23.8%," it said in a note on Wednesday.
The research house said price of natural rubber latex has eased to RM3.75 per kg (2013 average: MYR5.63 per kg), which is favourable for Karex.
As its products’ ASPs do not fluctuate with raw material prices, the company should be able to keep its earnings margins, it said.
The strength of the USD/MYR exchange rate is expected to benefit Karex, as revenue will have a greater sensitivity to the greenback relative to costs.
A 3% increase in the USD/MYR exchange rate could possibly raise earnings by around 3-4%, RHB said.
"We are confident on the company’s earnings growth, led organically by capacity expansion as well as its inorganic growth through the acquisition of Global Protection Corp," it noted.
Limited time offer:
Just RM5 per month.
