SURPASSING ANALYSTS’ ESTIMATES: Buying interest sees the condom maker’s shares close at RM2.45
KAREX Bhd's shares had ample thrust on its maiden trading day on Bursa Malaysia, surpassing analysts' estimates, as the condom maker outlined plans to double the size of its domination on the global stage.
Maybank Investment Bank Bhd had valued Karex at RM2.16, while JF Apex Securities Bhd valued the company at RM2.07 a share, which was a good premium over its initial public offering price of RM1.85 apiece.
Investors, though, had other thoughts racing through their minds, chasing the shares to an intra-day peak of RM2.50 a share.
The stock opened for trading at RM2.43, while profit-taking saw the stock fall to RM2.30, its lowest for the day, but renewed buying interest saw the shares closing at RM2.45.
The velocity of trading in Karex saw a spillover interest in the only other listed condom-related counter, Takaso Bhd. Takaso was among the top five most heavily-traded stocks.
Karex supplies to commercial customers, such as Durex, as well as government agencies and non-governmental organisations. It controls about 10 per cent of the global condom output.
Its chief executive officer Goh Miah Kiat said yesterday the company intends to tap markets in highly-populated countries as well as boost sales in laggard markets.
Karex, which has a presence in more than 110 countries, plans to go slow in markets such as Indonesia and Vietnam, as condoms are heavily subsidised by the government.
"We will enter the markets there at a later stage," Goh said, adding that in the immediate term, the company is looking to expand its manufacturing capacity.
Karex, which has two manufacturing plants in Malaysia and one in Thailand, plans to use some RM42 million from the RM75 million share sale to double its capacity to six billion units a year by the end of 2015.
This should help Karex raise its global market share from 10 per cent to 20 per cent by 2016.
Currently, Karex has a total condom manufacturing capacity of three billion units per annum across its three facilities in Pontian, Port Klang and Hat Yai in Thailand.
Analysts say the global condom industry is expected to expand 7.5 per cent annually to 30.4 billion pieces by 2016, while Maybank Research said demand for condoms is likely to grow because of the world population growth and increased use of the contraceptive.
In total, Karex's expansion plan comes with a RM100 million price tag, a sum the company believes will bolster its earnings.
For the financial year 2013, Karex's revenue jumped 22.6 per cent to RM231.4 million from RM188.8 million a year ago.