File photo shows foreign factory workers of Kossan group of companies waiting for their turn to undergo Covid-19 swab test in Meru during the December 4 to 10 period. — Bernama photo
KUCHING: Analysts are dampened by the additional 563 positive Covid-19 cases detected by Kossan Rubber Industries Bhd at its plant as at Dec 21, with the affected plant remaining closed until December 30.
In a filing with Bursa Malaysia, the rubber glove maker said another 7,000 employees were screened for Covid-19 following its Dec 16 statement that 427 positive cases had been detected at the premises of one of its plants.
The company had conducted a re-screening for the employees in the affected plant premises, it said.
“Arising from the subsequent screening, an additional 563 positive cases were detected as at December 21, 2020.
“Due to the continuous efforts in mitigating, containment and prevention of the widespread pandemic, the affected plant premises will remain closed until Dec 30, 2020,” it said.
Kossan said it would continue to monitor the situation closely and carry on with the re-screening exercise on an ongoing basis.
Researchers at Kenanga Investment Bank Bhd (Kenanga Research) said the temporary loss in production comprised 25 per cent of total output volume for one month which is expected to impact FY20E bottom-line by three to five per cent.
“The group is confident of sustained strong demand with orders filled up till end-CY21, reassuring us that lag impact from average selling price (ASP) hike will be felt in 4Q20 and 1Q21,” it commented in a report.
To recap, Kossan conducted a voluntary Covid-19 screening test in its glove division from December 4 to 10. Out of a total of 7,004 workers, five out of six locations registered zero cases with only one site reporting 427 positive cases out of 2,104 employees.
The factory stopped operations for sanitisation which has been completed. Thereafter, the group will undergo random sampling for antigen test due to asymptomatic symptoms every two weeks (20 per cent of workers).
In a previous update, Kossan’s management highlighted that it is difficult to predict when ASP will retrace but they stopped short of hinting ASP hikes will gradually ease sometime in 4Q20, but more likely the case in 2022 (rather than facing a steep decline) depending on the outcome of the effectiveness of Covid-19 vaccines.
“A retracement in ASP then, if any, would likely in their view, be gradual to be cushioned by restocking activities,” Kenanga REsearch added.
“However, due to potential concerns arising from new Covid-19 cases and hence causing temporary disruption in production, we conservatively reduce our target price from RM9.36 to RM7.50 as we attach a 20 per cent discount to our target price earnings ratio from 11 times to 8.8 times of its FY21 earnings per share.
“We highlight that to reduce the spread of Covid-19 infections; vaccination coverage should reach at least 60 to 70 per cent to build some form of herd immunity.
“Typically, herd immunity occurs when enough people in a population develop protection against a disease that it can no longer spread easily among them.”
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