KOSSAN RUBBER INDUSTRIES BHD LONG TERM & SUSTAINABLE GROWTH

Transcription

1 KOSSAN RUBBER INDUSTRIES BHD LONG TERM & SUSTAINABLE GROWTH STOCK CODE : 7153 REUTERS : KRIB.KL BLOOMBERG : KRI.MK 1

2 CONTENT Sa-wad-dee-kap!! Good day!! 1 Company & Business Overview 2 Growth Strategy, Market Segment & Positioning 3 Financial Performance (Historical & Projection) 4 Tackling Business Challenges 5 Rewarding Shareholders 2

3 Company & Business Overview Began in 1979 by specializing in manufacturing of technical rubber products and disposable latex gloves. One of the world largest powder-free natural rubber and nitrile medical glove manufacturers with annual capacity of 16.0 bn pieces Malaysia s largest manufacturer for Technical Rubber Products for automotive, marine, construction & civil engineering, mining, general industries & aerospace with total rubber compound consumed for FY2012 of more than 8,000 mts Our size : 5,000 workers, 15 plants, Occupied area : approx. 96 acres of land Yearly capital expenditure : RM50 to 70 million on capacity expansion (since 2005) Key Product : Medical gloves (Examination, Sterilized, Surgical), facemasks, Clean room gloves, Wipes Revenue : RM1.08 bn (FY2011), RM1.05 bn (FY2010), RM1.25bn (annualized FY2012) and projecting RM1.50 bn for 2013 Targeted growth in Revenue and Earnings of 15 to 20% for the next 3 years Robust operating track records with sustainable 5-years CAGR 14% for revenue and 18% for earnings Average ROE of approx. 20% for the past 5 years 16 years of unbroken profitability track record and dividend payout 3

4 Our Market Place & Product Category Latin Asia America Pacific 8% 12% Europe 30% Non- Medical 5% USA & Canada 50% Major OEM supplier to world leading MNCs for latex medical gloves and Technical Rubber Products (TRPs) More than 95% in medical category More than 80% of our total glove capacity were sold to developed countries US, Canada, Europe, Japan, Germany, Scandinavian Countries, Australia etc. We export to more than 100 countries with more than 200 active customers Working toward to be the industry leader and world key manufacturer in the special purpose gloves i.e. surgical and clean room Medical 95% 4

5 Growth Strategy, Market Segment, Positioning 5

6 Our Business Positioning And Market Segment DIFFICULT 1. Better profit margin 2. More stable selling prices 3. Less competition 4. More stringent quality requirements 5. Provide better business stability SPECIAL PURPOSE GLOVE (Surgical & cleanroom) (5% of total revenue) NITRILE (NBR) : 45% of total capacity NR POWDER FREE : 55% of total capacity 1. Higher risk of overcapacity 2. Low entry barrier due to easy technology 3. Potential price war by smaller manufacturers 4. Very price sensitive 5. Lack stable NR POWDERED (NON-MEDICAL) OTHER MATERIAL (PVC, PU, VINYL) EASY 6

7 Product Mix : Building More Nitrile Capacity Nitrile 43% Natural Rubber 57% Nitrile 50% Natural Rubber 50% Our production facilities are highly flexible and able to cater for both product segments. And, we prefer to have a well-balanced of product mix as this provides us with 7 BETTER BUSINESS STABILITY

8 Quantity (Billion Pieces) Our Capacity & Expansion Plan 25,000 20,000 15,000 10,000 5, (P) 2013(P) 2014(P) 2015(P) 2016(P) 1. Our expansion planning is totally market demand driven (Total World Consumption : 160 bn pieces and growing at 10-12% annually) 2. Targeting to add 8.0 bn pieces within the next 5 years beginning Utilization rate is consistently >85-90% (Industry average of 60 70%) 4. Production lines are highly versatile and interchangeable with minimum downtime 5. Production efficiency is incremental on each phase of expansion 6. Always work together with sizeable gloves buyers in the form of contract manufacturing 8

9 Past 5 years Financial Performance 9

10 RM'million Robust Growth Trend 2,000 1,800 1,600 REVENUE We are targeting 3 years CAGR of 15% 1,400 1,200 1,050 1,092 1,250 1, (P) 2013(P) 2014(P) 2015(P) 10

11 RM' million Robust Growth Trend PROFIT BEFORE TAXATION We are targeting 3 years CAGR of 15% years of unbroken profitability track record! (P) 2013(P) 2014(P) 2015(P) 11

12 OUR DIRECTION AND STRATEGY OF GROWTH, GOING FORWARD ORGANIC GROWTH BY COMMISSIONING MORE PRODUCTION LINES EXPANDING INTO EMERGING MARKETS FOR RUBBER PRODUCTS DIVERSIFYING INTO MORE STRINGENT PRODUCTS I.E. SURGICAL, CLEANROOM & SPECIALISED GLOVES FOCUSING ON NITRILE LATEX PRODUCTS SETTING UP PRODUCTION PLANTS IN INDONESIA FOR MORE COMPETITIVE COST STRUCTURE AND LOCAL MARKET FORMING STRATEGIC PARTNERSHIPS AND JOINT VENTURES LOCALLY AND ABROAD FORMING JV WITH POTENTIAL PARTIES (RUBBER, CHEMICAL PRODUCERS AND STATE ENTERPRISES) SETTING UP MORE REGIONAL DISTRIBUTION CENTERS AND WAREHOUSES TO PROVIDE CLOSER, FASTER SALES SERVICE TO CUSTOMERS SETTING UP DISTRIBUTION CENTERS AND WAREHOUSES

13 Tackling Business Challenges 13

14 Tackling Business Challenges No significant impact to selling price postnatural gas price adjustment still manageable. Natural Gas only accounts for 6% of the total cost Extra energy cost will be transferred to buyers Biomass is another alternative to natural gas Continuous R&D is in placed to ensure more energy efficiency to maintain overall cost competitiveness among the peers Latex Prices Volatility is the key concern Price hikes are mainly driven by speculation and not due to structural shortage in latex supply Increased material cost will be passed on to buyers as we work on a pricing formula agreed upon by buyers Increased new and replanting with structural slowdown in demand from China and India will mean lower and stable pricing going forward Energy Cost PROFITABILITY Exchange Rate Unsupportive policies on foreign labors is a potential threat to many labor intensive industries Embarking onto more advanced stage of automation and computerization on the production floors and manufacturing processes will reduce the dependency on manual workers Able to ensure quality consistency, less human errors, lowering output cost due to lesser rejects arising from human errors Labor Shortage Pressure arises if Thai Baht appreciates slower against the US dollar as compared to the Ringgit Impact is mild as compared to latex prices Need to observe more active hedging to protect the earnings margin 14

15 Rewarding Shareholders : Bonus Issues & Uninterrupted Dividend Payments 15

16 We deliver value to shareholders consistently since inception. How committed are we in creating value for our shareholders.. We deliver 5-years CAGR of 20% in shareholder s Fund We are maintaining our unbroken profitability record for the 16 th year We consistently reward our shareholders with generous bonus issues We have never failed in declaring dividend since inception Financial Year Shareholders Funds RM million Net Growth % % % % % % Financial Year Reward Paid-Up (Million shares) 1996 IPO Bonus Issue 8 for every Bonus Issue 1 for every Bonus Issue 1 for ESOS Bonus Issue 1 for Bonus Issue? Free warrants??? 16

17 Payout Ratio (%) Net Profit (RM' mn) Dividend Payment To increase Payout ratio to 40 to 50% in the next 2 to 3 years Higher earnings will mean higher dividend in absolute terms Consistent growing dividend payment track record since listing in 1996 Consistently profitable since inception in the 70s We afford to declare higher dividend due to our strong cashflow position & adoption of more efficient capital structure Our Net Gearing is LOW (Net Gearing : 17% in FY2012, 18% in FY2011 and 24% in FY2010) 60% 50% 40% 30% 20% 10% 0% 50% FY2015?? % FY (P) 2014 (P) 2013 (P) 2012 (P) Profit Payout Ratio 17

18 Why invest in Kossan Rubber? One of the World s largest manufacturer for latex gloves with strong reputation in product quality and services to its customers One of the very few organizations that deliver consistent growth since inception in 1970 s Well managed by a group of professional managers and rubber technologist/engineers Company with stable financial position and adopt prudent business strategy/approach Organization that adopts good risk management policy and always Prepared For Tomorrow Good business philosophy : LONG TERM AND SUSTAINABLE GROWTH Uninterrupted profitability with 17 years unbroken profit record since listing 1996 Uninterrupted dividend payment since listing in 1996 and aiming to increase payout ratio to 40-50% in the next 2 to 3 years Generous in rewarding shareholders via Bonus Issues and exploring Free Warrants in the near future. Good stock with cheapest valuation in the glove industry in Malaysia (ROE : 20%, Forward PER : 9x vs. Industry s 14x) More than 15 equity research analysts call the stock a BUY with target price ranging RM3.70 to RM

19 DO YOU HAVE ANY QUESTIONS? Kob Khun Krap!! THANK YOU FROM THE BOARD OF DIRECTORS AND SENIOR MANAGEMENT TEAM OF KOSSAN RUBBER INDUSTRIES BHD For more information, please visit our website : or your queries to edwardyip@kossan.com.my Awarded With: Best Company For IR & Best IR Professional 19