Kossan  Rubber  Industries  announced  last  Friday  that  its  wholly-owned subsidiary,  Ideal  Quality  SB,  has  entered  into  a  sales  and  purchase agreement with Himpun Menang Sdn Bhd to acquire 5.3 hectares of vacant freehold industrial land in Klang for a total cash consideration of RM39m. The proposed  acquisition is expected to be completed by 1Q15 and will be funded internally and/or through borrowings. (Source: Bursa Malaysia)

Comment:  We  view  the  acquisition  positively  -  it  is  in  line  with  Kossan’s capacity expansion strategy and the land is strategically located next to its existing  land,  where  the  group  is  constructing  two  new  plants,  target completion by mid-2016. Management has yet to finalise their plans for the new  land.  Preliminary,  management  is  considering  either  to  construct  two new  plants  or  to  build  one  plant  with  a  central  warehouse.  We  make  no changes  to  our  earnings  forecast  as  we  had  imputed  the  funding  in  our 2015E capex projection. Maintain BUY rating with target price of RM 5.95.

Source: Affin Hwang Capital Research - 15 Dec 2014