Top Story : Kossan – 3Q earnings could exceed expectations

Outperform
Results Preview
- Kossan is expected to announce 3QFY12/09 results on 24 Nov. We believe the results could exceed our expectations due to: 1) upward adjustments to selling prices, which more than covered the higher raw material cost; 2) better-than-expected margins as more higher-value gloves were sold during the quarter; and 3) stronger performance from the TRP segment.
- Qoq, we believe the revenue growth was mainly on the back of upward adjustments to selling prices in order to pass on the higher raw material cost to customers. 3Q core earnings, however, could rise by 12% qoq, as a result of margin expansion due to: 1) price adjustments made have more than covered the rising raw material cost and product mix; and 2) stronger performance from the TRP segment.
- We are keeping our FY09-11 earnings forecasts unchanged. Nevertheless, we highlight the potential of an upgrade in our numbers, pending the release of the 3Q results.
- We are placing our fair value of RM6.47 under review pending the release of the 3Q results. Our Outperform call however, remains unchanged.