Posted by johnny cash > 2015-04-01 09:42 | Report Abuse

Eyeing two plots of land
Karex has proposed to acquire two pieces of land where its existing plants in
Pontian are located. The proposed acquisition will ensure that Karex's
operations could continue without any interruptions, besides offering extra
room to expand its capacity in the future. We cut our FY15-17 EPS forecasts by
7-8%, mainly taking into account the dilution effect of a recent private
placement. While the placement will strengthen balance sheet and provide
ammunition for future expansion, the immediate effect was a dilution which
pushes up valuation, making the stock less attractive. We downgrade our call
from Add to Hold, with a lower target price (based on 23x CY16 P/E, a 10%
premium over Hartalega) due to the EPS cut. For rubber-related stocks, we
recommend Kossan.
What Happened
Karex announced that its wholly-owned subsidiary has entered into a sale and
purchase agreement with Tropical Produce Company (Pte) Limited for the
purchase of two pieces of land measuring approximately 4.6ha for a total cash
consideration of RM14.8m. This will take three months to complete and it will
be financed by the proceeds from a private placement exercise that was
completed on 11 Mar 2015. In March 2015, Karex placed out 40.5m new shares
which represents 10% of its paid up capital. The company intends to utilise the
proceeds of RM158m mainly for business expansion purposes.
What We Think
Karex’s existing manufacturing plants in Pontian are currently located on the
land to be acquired. Since 2004, the company has been leasing the land and
paying an annual rental of approximately RM376.8k for its manufacturing and
warehousing operations. As the tenancy agreement will expire on 31 Oct 2015,
the group is now taking the opportunity to acquire the land to prevent any
interruptions to its operations or the non-renewal of the tenancy agreement by
the lessor. With this land purchase, Karex may also not need to relocate its
existing manufacturing facilities to the new plant in Pontian that will be
completed by Jun 2015. This will give Karex more room to increase its capacity
to cater to future condom demand. Funding is not an issue as this purchase will
be fully funded using the proceeds from the recent private placement.
What You Should Do
We advise investors to stay on the sidelines. The share price has appreciated by
58% since our upgrade on 11 Aug 2014 and we believe that this has already
factored in Karex’s strong earnings growth.

Posted by johnny cash > 2015-04-01 09:43 | Report Abuse

Downgrade to Hold
Karex’s share price has appreciated by 58% since our upgrade on 11 Aug 2014.
We believe that the share price has already priced in the strong earnings growth
and the stock is now fully valued. While the company is looking to acquire
another company in addition to Global Protection, we believe that the positive
earnings impact on its bottomline will not be substantial as the target company
will most likely be a smallish company with strong growth potential. Although
it is penetrating into new markets via One Brand, material earnings
contribution will not filter through so soon as it takes time for Karex to grow its
sales in a new market. We also cut our FY15-17 EPS forecasts by 7-8% to take
into account the dilution effect of the recent private placement. We also tweak
our capex assumption for the proposed land acquisition and switch of capacity
expansion from Pontian to Thailand. We downgrade the stock from an Add to a
Hold.

Posted by johnny cash > 2015-04-01 09:44 | Report Abuse

cut tp to 4.57 from 4.96

Posted by johnny cash > 2015-04-01 09:44 | Report Abuse

by cimb

Posted by speakup > 2015-04-01 09:53 | Report Abuse

condom is GST standard rated, means use less condoms..... have more kids :-)

Posted by Johny Khong > 2015-04-01 10:03 | Report Abuse

@Tigerbeer, tis is just temporary volatility and I can tolerate it. I'm holding for longer term and is waiting for its upcoming bonus shares. Hv a nice day.

Posted by cheeseburger > 2015-04-01 11:15 | Report Abuse

i am not worry at all..is good time to collect at big sale..

Posted by cheeseburger > 2015-04-01 11:32 | Report Abuse

and those who speak about GST...Karex product is worldwide. What is local market compare to overall worldwide sales?

Posted by lulhunter > 2015-04-01 11:44 | Report Abuse

Up fast, drop also fast.

Posted by Johny Khong > 2015-04-01 13:27 | Report Abuse

Flushing time of all low-grade investors. Hehe... Hv full confidence in Karex on d longer term and u w be rewarded handsomely. True Karex investors w not stress themselves over such price volatility.

Posted by member41 > 2015-04-01 13:31 | Report Abuse

Just now 437 now 448... got support... gd to buy when drops...

Posted by johnny cash > 2015-04-01 13:39 | Report Abuse

4.37 was depletion test,, 4.48 was errection test after depletion..KAREX PASS THE TEST

Posted by cheeseburger > 2015-04-01 14:52 | Report Abuse

Somebody's concern on:
High dependency on foreign labour and lack of long-term contracts with customers.

what is the problem of high dependency on foreign labor? if mostly they are running semi-automated in production line. this is not really a labor intensive manufacturing like constructions. The key here is is there sufficient supply of labor if needed? if we are not purely depend on 1 country to supply the labor. There are multiple choices as of today.

lack of long term contracts? the barrier of entry into condom business is high. This is not something the competitor can easily get in to share the cake as they wish. As long as you are the biggest in world. You have stronger capability to control cost in terms of economic of scale.

Report from The Edge in March:
Global condom demand growth CAGR 7.1% versus supply growth 4.2%
So demand growth is almost double of supply in coming years. Karex is in position to capture the opportunity by acquire more land for expansion.

Posted by Johny Khong > 2015-04-01 17:42 | Report Abuse

@cheeseburger, is tht wat has caused Karex's price so erratic today?

Posted by Johny Khong > 2015-04-01 17:57 | Report Abuse

Hartalega oso suffered d same today.

Posted by member41 > 2015-04-01 18:04 | Report Abuse

Johny let's buy more and wait for bonus. :)

Posted by Johny Khong > 2015-04-01 18:09 | Report Abuse

Yea, I'm goin on a buying spree tomorrow.

Posted by 8wpwtmt8 > 2015-04-01 20:06 | Report Abuse

Member41 and Johny Khong, buying spree means at what price range? Kindly please enlighten me. Last time I bought 10 lots at RM4.05 but sold all too early at RM4.26. Now hope to buy back.

Posted by ampabella > 2015-04-01 22:24 | Report Abuse

mahu attack sama dia at rm4.00, lai lai lai jangan takut

Posted by Tigerbeer > 2015-04-01 23:04 | Report Abuse

Should be below 4...

Posted by member41 > 2015-04-01 23:13 | Report Abuse

Trying to buy near $4 or wait till ex bonus below $3

Posted by skylifttoptoptop > 2015-04-01 23:35 | Report Abuse

good advantage to top up.. bonus hooray..

Posted by alphajack > 2015-04-01 23:40 | Report Abuse

downgrade too harsh la...should rebound to 4.50 back lai

Posted by 8wpwtmt8 > 2015-04-01 23:56 | Report Abuse

While the placement will strengthen balance sheet and provide ammunition for future expansion, the immediate effect was a dilution which pushes up valuation, making the stock less attractive. We downgrade our call from Add to Hold, with a lower target price (based on 23x CY16 P/E, a 10% premium over Hartalega) due to the EPS cut. (TP: RM4.96 cut down to to RM4.61)

CIMB Research

Posted by i3i2i1 > 2015-04-02 07:16 | Report Abuse

always like that.. but wait for pullback, still good run!

Posted by i3i2i1 > 2015-04-02 09:08 | Report Abuse

(HOLD▼, tp:RM4.57) - Eyeing two plots of land
Karex has proposed to acquire two pieces of land where its existing plants in Pontian are located. The proposed acquisition will ensure that Karex's operations could continue without any interruptions, besides offering extra room to expand its capacity in the future. We cut our FY15-17 EPS forecasts by 7-8%, mainly taking into account the dilution effect of a recent private placement. While the placement will strengthen balance sheet and provide ammunition for future expansion, the immediate effect was a dilution which pushes up valuation, making the stock less attractive. We downgrade our call from Add to Hold, with a lower target price (based on 23x CY16 P/E, a 10% premium over Hartalega) due to the EPS cut. For rubber-related stocks, we recommend Kossan

Posted by samer > 2015-04-02 10:39 | Report Abuse

when is the bonus?

Posted by Tigerbeer > 2015-04-02 12:14 | Report Abuse

Cimb really want to push this stock down..

Posted by cheeseburger > 2015-04-03 15:59 | Report Abuse

have to understand how the big player playing the game...

Posted by cheeseburger > 2015-04-03 16:01 | Report Abuse

they cut forecast due to dilution, not bcoz losing its value.

Posted by Tigerbeer > 2015-04-03 17:23 | Report Abuse

Or maybe some big boss wants to collect more, thus the order...

Posted by johnny cash > 2015-04-03 21:30 | Report Abuse

eerrection time today good

Posted by optimusprime > 2015-04-03 21:33 | Report Abuse

i donno who use condom. i mean i donno any of my friends.

actually who use condom har?

Posted by observer168 > 2015-04-05 15:10 | Report Abuse

Stock has been a great performer.

Posted by Johny Khong > 2015-04-06 18:50 | Report Abuse

Bonus ex-date: 16 Apr '15; Entitlement date: 20 Apr '15. Thanks Karex.

Posted by member41 > 2015-04-06 19:27 | Report Abuse

More balloons for everyone. Yahoo.

Posted by Johny Khong > 2015-04-07 05:27 | Report Abuse

m41, did u attend d EGM yesterday?

Posted by member41 > 2015-04-07 06:38 | Report Abuse

Bro johny I dint manage to go. Did u attend

Posted by Lucas Chan > 2015-04-07 08:55 | Report Abuse

gogogo bonus!

Posted by Johny Khong > 2015-04-07 12:21 | Report Abuse

No, Shah Alam is abit too far for me

Posted by member41 > 2015-04-07 13:31 | Report Abuse

Not sure can it hit $5 before 16th... maybe higher a bit than now

Posted by cheeseburger > 2015-04-07 15:01 | Report Abuse

last year if you buy before bonus issued, today the profit earning is about 70% from your initial investment. How much will you get from FD? :)
Now is coming another round of bonus, demand for condom is ever growing, is just like food, forever there is demand out there...Coming June comes another possibly of USD rate hike, 90% sales in USD that i think buying karex is just like buying USD...for wealth protection...

Posted by Kukuman > 2015-04-07 15:02 | Report Abuse

condom is ever growing? what does it shows?

Posted by 彬彬 > 2015-04-07 15:06 | Report Abuse

(Y)

Posted by Mel2learn > 2015-04-07 17:02 | Report Abuse

you all think its better to buy before the bonus issue or after? Whats your say?

Posted by Lucas Chan > 2015-04-07 18:00 | Report Abuse

Mel2learn I will buy b4 bonus issue and sell after it and will consider buy again! Because condom is long term good business!

Posted by Lucas Chan > 2015-04-07 18:01 | Report Abuse

So what I mean is I will sell once I gain the bonus!!

Posted by Lucas Chan > 2015-04-07 18:02 | Report Abuse

Hope my suggestion can help u!

Posted by i3i2i1 > 2015-04-07 18:07 | Report Abuse

never stop erecting! http://www.nst.com.my/node/79708

Posted by sg999 > 2015-04-07 18:10 | Report Abuse

no give dividen???