Kossan Rubber Industries Bhd remains a HOLD with a target price of RM1.24 from Hong Leong Investment Bank (HLIB), which said the group’s proposed acquisitions of cleanroom product businesses could strengthen its strategy of differentiating from Chinese glove makers.
Kossan had entered into share sale and purchase agreements to acquire 100% of Inout Enterprise (IOS) for RM48.4 million and 51% of Inout Enterprise (Thailand) (IOT) for RM16,000. The transactions are expected to be completed by the first quarter of 2027 and will be fully funded through internally generated cash.
The research house viewed the acquisition positively as IOS brings more than 30 years of experience in cleanroom product trading and distribution. IOS recorded RM20.9 million in revenue and RM1.8 million in profit after tax in FY2025, translating into an 8.4% margin compared with Kossan’s 7.3%.
HLIB said the implied trailing price-to-earnings ratios of IOS and IOT stood at 4.7 times and 0.05 times respectively, which it considered undemanding given the potential synergies.
The acquisitions are estimated to contribute an additional 6.1% and 5.6% to Kossan’s core profit after tax and minority interest in FY27 and FY28 respectively.
HLIB left its earnings forecasts unchanged pending Kossan’s second-quarter results, while maintaining its HOLD call and RM1.24 target price. The research house also highlighted Kossan’s RM1.63 billion net cash position and potential margin gains from automation initiatives.
It added that continued disruption around the Strait of Hormuz could support average selling price adjustments by tightening global nitrile butadiene rubber availability and temporarily easing glove oversupply concerns.
As of 10.44 am, the stock price rose 1.82% to RM1.12.
