KOSSAN Rubber Industries Bhd has joined the list of glove makers with workers who are infected by COVID-19.
This follows the widely reported outbreak of COVID-19 infection among the workforce of Top Glove Corp Bhd and Hartalega Holdings Bhd.
According to TA Securities Research, a screening test on Dec 4 – and completed on Dec 10 – on the company’s 7,000-strong workforce revealed 427 positive cases (eight locals and 419 foreigners) at its K2 production facility in Meru, Klang.
Nevertheless, there was no reported cases at the company’s five other production facilities at other locations.
“The group immediately stopped the whole operations in Meru to fully sanitise and quarantine all the workers in the affected area for 14 days,” reported analyst Tan Kong Jin in a company update.
“After the 14 days, a second PCR (polymerase chain reaction) test (Dec 16-17) would be conducted for the balance of 1,667 workers.”
If the results are negative, Kossan would resume its Meru operations in stages from Dec 20 onwards, according to the research house.
“In short, Meru operations would be shut for about two weeks, affecting 25% of total output,” projected Tan.
“We estimate that potential loss of earnings from this closure to be around RM24 mil which is equivalent to 2.1% of projected earnings for FY2020.”
Moving forward, Kossan would conduct the COVID Antigen test (RM70 per test) every two weeks on 20% of its workers via random sampling.
“All of Kossan’s foreign workers are staying at isolated compound not in the community area. Thus, it is easier for Kossan and the Health Ministry to control the spread of the virus,” noted Tan.
Despite the situation, TA Securities Research remains bullish on Kossan by maintaining its “buy” rating with a target price of RM9.01/share.
“In terms of normalised earnings and target price, we have assumed a conservative average selling price (ASP) assumption base on targeted expansion plans,” projected the research house. “Thus, we believe the stock is still cheap at this juncture.”
At 9.15am, Kossan was up 15 sen or 3.06% at RM5.05 with 957,100 shares traded, thus valuing the company at RM12.89 bil. – Dec 16, 2020
