Sell on strength. 1QFY12 net profit is likely to undershoot market's expectation but in line with ours. We think recent share price strength (+8% in 2 months) is sentiment driven on positive leading indicators (falling latex cost, stronger USD). However, we caution that over-capacity in the latex powdered segment (53% of product mix) will limit earnings recovery and there is now downside risk to street's earnings estimates. The stock currently trades at an expensive valuation of 16x CY13 PER. Our RM3.40 DCF-derived TP implies 12x CY13 PER.


Maybank research (12 December 2011)

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