Kossan to retain 2Q18 PATAMI
KOTA KINABALU: Kossan Rubber Industries Bhd’s (Kossan) second quarter of 2018 (2Q18) profit after tax and minority interest (PATAMI) is expected to remain similar to its 1Q18 results, analysts say.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), as there is no new capacity expansion in 2Q18, it expected Kossan’s 2Q18 PATAMI (due out by mid-August) to mirror that of 1Q18, which is RM44.5 million.
“Hence, we expect 2H18 to be better as the new plant started commissioning by July 2018,” Kenanga Research said.
“This will bring 1H18 PATAMI to RM89 million, which is within expectations at 43 per cent-41 per cent of our and consensus full-year forecasts.”
On another note, Kenanga Research highlighted that Kossan’s Bidor plant alone when completed, could see glove production capacity of 34 billion pieces per annum, which will more than double from 25 billion pieces currently (once Plant 16 is fully commissioned).
Kossan recently clarified in an announcement on Bursa Malaysia that the integrated glove manufacturing project in Bidor, which is still in the planning stage, is expected to begin construction in 2019, subject to all relevant approvals being obtained.
“However, we are uncertain about the expansion works at Bestari Jaya (56 acres) of which the land was purchased somewhere in 2013 for RM35.4 million.”
Kenanga Research recalled that Kossan is buying two pieces of leasehold land measuring approximately a total of 824.1 acres located in Bidor, Perak, for a cash consideration of RM82.4 mililon from Perbadanan Kemajuan Negeri Perak.
It noted that the price works out to RM100,000 per acre or RM2.29 per square foot (sq ft).
The research arm expected Kossan to spend a bit more capital expenditure (capex) into this land, including widening the access road.
“This proposed acquisition is expected to be completed by 1Q19. Amplifying the strong demand for nitrile gloves, the land is most likely be used to house factories for the production of nitrile gloves.”
In its outlook, Kenanga Research noted that the glove former issue that affected Plant 16 has been resolved with most lines commercially ready by July 2018 following two scheduled delays.
The research arm further noted that Plant 16 has an installed capacity of three billion pieces per annum and will focus on the group’s patented Low Derma Technology gloves.
“With the completion of Plant 16, the group is now operating at 25 billion pieces capacity (up 14 per cent),” the research arm said.
“In anticipation of higher demand for Low Derma nitrile gloves, the group has started the construction works for Plant 17 and 18.”
It added that these two new plants equipped with high speed dipping technology and high degree of automation are capable of producing up to 4.5 billion pieces (up 18 per cent of current production capacity, at 1.5 billion and three billion pieces, respectively) of nitrile gloves per annum once completed in 3Q18 (Plant 17) and 1Q19 (Plant 18).