Results

• 4QFY15 revenue of RM78.9m (+25.0% yoy, +10.5% qoq) was translated into adjusted PATAMI of RM17.6m (+21.0% yoy). This took FY15 adjusted PATAMI to RM60.8m (+62.7% yoy), accounting for 101.8% and 101.1% of HLIB and consensus full year estimates, respectively.

Deviations

• None.

Dividends

• None.

Highlights

• Revenue for 4Q15 grew by +25% yoy, owing to higher condom sales (+10% yoy). We understand that sales were mainly coming from commercial orders which commanded better margin.

• EBITDA margin has been trending upwards from 24.1%, 26.1% and 27.2% for 4Q14, 3Q15 and 4Q15, respectively. Margin expansion was mainly attributed to higher sales of better margin products as well as favourable forex and raw material prices.

• Utilization rate has improved sequentially to 71.1% during the quarter from 70.9% on previous quarter.

• ASP was slightly better qoq but lowered yoy.

• Effective tax rate for the group was lower than statutory tax rate due to profit generated by foreign subsidiary.

Risks

• Surge in raw material prices, forex risks, revision on foreign labour policy, successful invention of HIV/AIDS cure, product substitutions for condoms.

Forecasts

• No changes in our earnings pending analyst briefing today.

Rating

HOLD , TP: RM3.09

Positives

• Worl d’s largest condom manufacturer; ever - increasing global condom demand; strong in-house R&D; licensed to export to major part of the world; and successful acquisition of Global Protection Corp.

Negatives

• High dependency on foreign labour and lack of long-term contracts with customers.

Valuation

• We maintain our HOLD recommendation as well as our TP of RM3.09.
• Our valuation is pegged to unchanged P/E multiple of 23.8x of CY16 EPS, based on 2SD above its international peers.

Source: Hong Leong Investment Bank Research - 26 Aug 2015