By Xavier Kong
Karex was the top gainer for the day, with almost 43.8 million shares changing hands.
“It did very well, it’s one of the better IPOs this year ….it was quite unexpected actually,” a broker with a local house said when contacted.
At the sounding of the ceremonial gong, the Karex’s stock surged 49 sen to RM2.34, with some 4.4 million shares changing hands, at the first few minutes of the opening bell.
Judging by some analyst reports, Karex is now trading at or has surpassed its fair value range. Much of the optimism stems from its aggressive expansion plans.
Karex raised RM75 million from its IPO, out of which RM42 million (56%) would be utilised as as capital expenditure to double the company’s manufacturing capacity to 6 billion units by the end of 2015, with the expansion exercise taking place in stages at all three of the company’s manufacturing facilities.
In a report last month TA Securities had pegged a fair value of RM2.40 on the condom maker’s stock, and said, “ We like Karex for its aggressive expansion plans to double capacity to six billion pieces per annum.
“Assuming a utilisation rate of 70%, and average selling price of three sen… the additional capacity will boost revenue by RM201.6 million once completed.
TA added, “We believe the group offers a good proxy to the healthcare sector due to the defensive characteristics of the condom industry. Apart from abstinence, there are no substitutes to condoms in the fight against STI and HIV,” TA said.
From the balance of the proceeds, RM14 million (18%) has been allocated as working capital, RM10 million (10%) as repayment of bank borrowings, RM5 million (8%) for listing expenses and the remainder RM4 million (5%) for research and development purposes.
Karex registered a net profit of RM29 million on the back of a total revenue of RM231.4 million for its financial year ended June 2013. Net profit for the company surged by 141.6% year over year (y-o-y), with revenue growing 22.6% y-o-y.
TA has forecast Karex registering net profits of RM37.3 million from RM283 million for its financial year ending June 2014.
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