Caught in middle-income trap

Read this article from TheStar online.
A graduate teacher starts at RM2,500 per month in Malaysia, compared to RM6,196 in Singapore and RM15,661 in Hong Kong. Malaysian wages have fallen behind partly due to the gross divergence between the suppressed Malaysian CPI and that of the world.

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LATEXX have a good year

FY 31/12/09
Financial Result
For the 4Q ending 31/12/09, LATEXX revenue improve 27.3% to RM102.84m from RM80.8m recorded on preceding quarter. Net profit also increase 20.7% to RM17.3m. Year-on-year comparison saw group revenue jump 47.1% to RM328.43 million from RM223.25 million and profit before tax increased by 243.6% to RM52.22 million from RM15.20million respectively.Increase in revenue and net profit were mainly driven by recent capacity expansion and aggressive marketing strategy, overall cost savings also help.

Stock Valuation
With P/E 14.1X (EPS 26.7sen, closing 3.77) LATEXX is fairly attractive.

Technical Outlook
Short term price movement can be very much influence by oversea market. However, it is in a long term uptrend. Stochastic crossover and excited result should sparked some interest on this stock.

Future Prospect

• Installation of 8 double formers production lines was completed in Dec 09 and is in full operation.
• Construction of additional production plant is in progress, expected to start operation early 2010.
• Total capacity will increase to 9bil pieces per annum by 2011.
• JV with Budev BV to produce, market and distribute non proteins rubber glove. This is a new and potentially higher margin product.
• Target to increase nitrile glove output to more than 30% in 1Q10 due to strong demand.

Conclusion
Due to the better than expected 4Q09 result and more positive catalyst, I think Latexx has OVERWEIGHT the sector. It should be revalue with sector average of P/E 16x, come out with TP4.27.

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