Kossan Rubber Industries: Maintain Buy - Falling Latex Price Yet To Play Out

• Good results. 2Q12 net profit of MYR24m (+8% QoQ, +13% YoY) lifted 1H12 net profit to MYR46m (+4% YoY). Though 1H12 made up 45% of our full-year forecast and 42% of street's estimates, this is within expectations as we foresee a stronger 2H12 on lower input costs and contribution from new capacity.
• We think the long-term soft latex price story has yet to play out, given Kossan's relatively flattish share price performance and cheap forward PER of 8.8x. Maintain forecasts, BUY rating and TP of MYR3.75 (10x 2013 PER).

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Source: Maybank Research - 24 August 2012