Food for thought
Kenanga Report On Supermax - a buy upgrade
Highfive Bread
Publish date: Sat, 01 Sep 2018, 12:22 PM
Why did I buy Supermax? All because of Kenanga R & I report.
Infor.provided by Kenanga
1. Revenue +16%
2. PATAMI +59%
3. Demand is higher
4. Efficiency and productivity have increased
5. PBT Margin has increased to 12.8% from 9.6%
6. Target price upgraded to 2.60 from 2.20,an increase of 18.18%
7. PE upgraded to 15 from 12,an increase of 25%
8. Upgraded +1.0 SD above its historical forward ave
9. Given 30% discount to the sector ave.because of weak earnings guidance only and not because of falling sales,profits or dividends.Dividend has gone up by 45.45%,from 5.5 to 8 cents.
( Please bear in mind,the 5 yr.ave.PE is not suitable to be used as it did not take into account the court case of the CEO and the water problem faced by Supermax then.The PE was exceptionally low. It was not normal,it was distorted by all these events.)
Top Glove PE 33.12 X 70% = 23.18
Harta PE 50.39 X 70% = 35.27
Kossan PE 31.25 X 70% = 21.87
Therefore even with a steep discount Supermax PE should be around 22
10. According to Kenanga,Supermax will increase its capacity by 16% from 3qtr.18 to 2H19.
Where as Top G plans to increase supply by 14%,done gradually,and Harta to boost production by 15% in 3 years time. That means Supermax is increasing production faster than the other two companies
11. Even after paying for the contact lens business,Supermax still came out with a good set of results and further more the other 3 companies are not paying a significantly higher dividend than Supermax
12. Kenanga highlighted that the effective tax rate could come down in the future. Tax planning must be done by all companies.Especially when there is a 10% penalty waiting for you if you get it wrong by 30%. Not surprisingly,the the final qtr.expenses are higher to lower down the tax
Kenanga has infact upgraded Supermax to a BUY.That is exactly what I have done.
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Discussions
Be the first to like this. Showing 6 of 6 comments
As for me a PE 22 - 24 for now is fair value. Will be higher when contact lens business takes off. Unfortunately I cannot control the PE ratio,only the fund managers and syndicates can. I am only sharing what I have done,I am not a sifu.
2018-09-01 16:54
anyways they generated more cash this quarter altho hidden in p&l statement its obvious in cash flow statement
2018-09-01 19:53
In my opinion, it should be the lowest PE among the three mentioned. In addition, it needs to factor in the insider trading issue as well. The company also has the lowest efficiency and innovation among gloves manufacturers.
PE=18 (10% off PE=20 allocated)
Based on latest EPS=0.16, RM2.88 is fair value.
2018-09-05 20:38
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calista
so whats the value u put on supermax?
2018-09-01 16:35