Latexx Corporate Presentation 4Q2011

7/27/2019 Latexx Corporate Presentation 4Q2011

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CORPORATE PRESENTATION

February 2012

Prepared by: Dr. Liew Lai Lai


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Latexx Partners Berhad

Stock Exchange Main Market, Bursa Malaysia

Ordinary Shares

Stock CodesBursa: LATEXX/7064Bloomberg: LTX:MK

Reuters: LATX.KL

Share Capital RM111.420 mil (222,839,670 shares of 0.50 sen each)

Market Capitalization RM441.223 mil (RM1.98/share as at 31 Jan 2012)Warrants 2007/2017

Stock CodesBursa: LATEXX-WA/7064WA

Reuters: 7064WA.KL

Balance No. of Warrants 52,009,601

Market Capitalization RM72,813 mil (RM1.40/share as at 31 Jan 2012)

Exercise Terms 1 warrant for 1 new share at RM0.53

Expiry Date 6 Jun 2017

The first rubber glove producer listed in Malaysia in 31 Jan 1996

Corporate Information

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Started in 1988, Latexx is a leading and among the top 5 largest

medical examination glove producers in Malaysia

Production facilities situated in a single location of 50 acres in

Kamunting, Perak, 32% still vacant

With 2,500-strong manpower, the 6-plant facilities have total of

89 production lines and annual capacity of producing 9 billion

pieces of gloves per year

Business model of contract manufacturing (OEM) of rubber and

nitrile gloves for global medical product brand names

Business Overview

Situated in one location, the Group is one of the most efficient gloves

producers in Malaysia

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Products

Produces both rubber and nitrile glovesnitrile gloves grew the fastest

Non-sterile, idealfor hypersensitive

persons to latexprotein

Custom-mouldedambidextrous glove

Powder-Free Latex ExaminationGlove

Non-sterile, all-

purpose latexexaminationgloves

Low inextractable

protein andchemical residue

Powdered Latex ExaminationGlove

100% syntheticrubber

Provides better gripfor wet and dry

condition. Unique design offers

excellent tactility,with no hand fatigue

and sensitivity

Powder-Free Nitrile ExaminationGlove

DescriptionFY 2008

(%)FY 2009

(%)FY 2010

(%)

YTD 2011(%)

Q1 Q2 Q3 Q4 FY 2011

Powdered Latex 56 24 17 8 4 9 10 8

Powder Free Latex 30 56 40 24 30 27 29 28

Powder Free Nitrile 14 20 43 68 66 64 61 64

Total 100 100 100 100 100 100 100 100

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Latexx focuses on higher-end premium segment, particularly nitrile

products......

Revenue Contribution

2010

Nitrile

43%

PP 17%

PF 40%

6

2009Nitrile

20%

PF 56%

PP 24%2011

PF

28%

Nitrile

64%

PP8%


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Production Facilities

Accredited production facilities that comply with international medical

standards Accreditations of the facilities include thefollowing:

ISO:9001:2000 (Awarded by TUV

Management service GmbH, Germany)

ISO 13485:2003 (Accredited byStandards council of Canada by TUV

America Inc.) EN ISO 13485:2003 (Awarded by TUV

product Service GmbH, Germany)

Awarded for Standard Malaysian Glove

Scheme by The Malaysian Rubber Board

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Clientele Base

Renowned clientele in medical supply industrytop distributors in the world,

geographically diversified customer base across more than 100 countries

Clientele base of more than 300

worldwide, consisting of global glove

brands, medical suppliers, resellers

and distributors, not dependent on

any single customer, highest numberof MNC accounts in the industry.

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Sales by regions

Revenue by Geographical Region

Geographically diversified, exporting to more than 100 countries, main

contribution of revenue from advance countries

Sales by sectors

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Local

12%

Europe27%

Asia pacific

15%

Latin

America1%

Middle East

4%

USA

41%

Medical

91%

Non-Medical9%


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4Q11 Revenue

Strong and consistent quarterly performance despite challenging

headwinds in the industry .

Description4Q2011RM '000

3Q2011RM '000

Growth(%)

4Q2011RM '000

4Q2010RM '000

Growth(%)

Revenue 89,694 121,813 -26.4% 89,694 106,713 -15.9%

Operating Profit 8,988 15,865 -43.3% 8,988 17,964 -50.0%

Operating Profit Margin (%) 10.0% 13.0% -3.0% 10.0% 16.8% -6.8%

Profit Before Tax (PBT) 7,381 14,130 -47.8% 7,381 16,522 -55.3%

PBT Margin (%) 8.2% 11.6% -3.4% 8.2% 15.5% -7.3%

Profit After Tax (PAT) 926 12,729 -92.7% 926 5,563 -83.4%

PAT Margin (%) 1.0% 10.5% -9.4% 1.0% 5.2% -4.2%

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4Q11 Profit and Margin

Sustainable EBITDA margin due to effective product mix & better

operation control..contributing to higher NTA & EPS comparing toprevious quarter

Description 4Q2011RM '000

3Q2011RM '000

Growth(%)

4Q2011RM '000

4Q2010RM '000

Growth(%)

EBITDA 12,452 19,232 -35.3% 12,452 20,955 -40.6%

EBITDA Margin (%) 13.9% 15.8% -1.9% 13.9% 19.6% -5.7%

Net Tangible Asset (NTA) 269,113 273,739 -1.7% 269,113 234,784 14.6%

NTA per share (RM) 1.23 1.23 0.0% 1.23 1.07 15.0%

EPS (sen) 0.42 5.71 -92.6% 0.42 2.11 -80.1%

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G R T d


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Gross Revenue (RM 'mil)

440.6

497.2

328.4

223.3

150.8141

127.6

60.5

2004 2005 2006 2007 2008 2009 2010 2011

Group Revenue Trend

Growth boosted by higher production capacity , global demand

growth of rubber glovespremium product mix play a key role

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G P fit T d


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Group Profit (RM 'mil)

0

20

40

60

80

100

RM'

mil

0.0%

5.0%

10.0%

15.0%

20.0%Margin

EBIT 3.4 7.8 7.3 6.0 18.5 58.5 89.8 63.3

PAT -0.7 4.3 3.9 4.9 15.2 52.1 65.5 44.0

EBIT Margin 5.5% 6.1% 5.1% 4.0% 8.3% 17.8% 18.0% 14.4%

PATMI Margin 0.0% 3.4% 2.8% 3.2% 6.8% 15.9% 13.2% 10.0%

2004 2005 2006 2007 2008 2009 2010 2011

Improving operating profits from 2007 spurred by effective operation

and cost control..

Group Profit Trend

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E i P Sh T d


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Earnings Per Share Trend

Strong track record of growth and financial performance

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Earnings Per Share (Sen)

-0.34

2.18 2 2.47

7.72

26.07

31.21

19.8019.62

24.68

16.94

2004 2005 2006 2007 2008 2009 2010 2011

Adjusted EPS Diluted EPS

4Q11 BALANCE SHEET


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4Q11 BALANCE SHEET

Strong and healthy balance sheet with much financial flexibility

for expansion

DescriptionsAs at 31.12.11

RM milAs at 30.09.11

RM mil

Fixed assets, other investment & goodwill 256.0 257.9

Inventories 76.6 64.0

Trade receivables 50.7 78.6

Cash and bank balances 55.7 64.8

Shareholders equity 269.1 273.7

Total borrowings (short and long term) 101.4 112

Net Cash Flow from Operating Activities 18.4 21.1

Free Cash Flow 2.4 1.2

Trade Payables cycle (days) 52 53

Net Gearing 0.18x 0.17x

Return on Average Shareholders Equity (Annualised) 13.1% 23.2%

Return on Average Total Assets (Annualised) 8.1% 13.5%

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Group Financial Ratios


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DescriptionFY 2008 FY 2009 FY 2010

YTD 2011

Q1 Q2 Q3 Q4 FY 2011

Receivables cycle (days) 63 46 39 54 54 58 51 54

Inventory cycle (days) 57 38 34 45 37 47 77 52

Return on Assets (ROA) 7.8% 5.1% 22.5% 4.0% 4.7% 5.8% 2.0% 4.1%

Return on Equity (ROE) 12.6% 9.8% 38.2% 6.6% 8.3% 3.4% 3.3% 5.4%

Interest cover 5.6x 9.9x 16x 11x 14x 9.2x 6x 10x

Gearing ratio (Net) 0.47 0.35 0.13 0.14 0.16 0.17 0.18 0.16

Current ratio

1.1x 1.1x 1.6x 1.8x 1.7x 1.7x 1.2x 1.6x

Group Financial Ratios

Healthy Financial Ratios indicating good financial health..

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4Q11 Cost Structure


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Cost Structure

(in % ofTotal Production Cost)

Overhead andother

9%

Packaging

3%

Labour

5%

Chemical

8%

Fuel10%

Latex

32%

Nitrile

33%

4Q11 Cost Structure

Sustaining the effective cost structure due to due to effective

operation control, cost saving measures and enabled by being asingle location manufacturer..

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Dividend Payout


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Dividend Payout

First dividend payout in 1Q09.1Q10 payout 2.5 sen, 2Q10 further payout 2nd

interim dividend of 2.5 sen., final tax exempt dividend of 2.5 sen for 2010,

the Group is set for consistent dividend payout in the future..

Financial

YearDescription Payment date

Dividend

(%)

Value

(RM'000)

20091st interim tax exempt dividend

2nd interim tax exempt dividend

12.06.2009

16.12.2009

2%

2%

1,947

1,973

2010

1st interim tax exempt dividend

2nd interim tax exempt dividend

Final tax exempt dividend

05.07.2010

05.10.2010

18.07.2011

5%

5%

5%

5,271

5,445

5,552

2011 1

st

interim tax exempt dividendFinal tax exempt dividend 05.01.2012TBA 5%3% 5,553*3,332

Total 29,073

* Estimated

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Key Industry Trends


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Enables MNCs to focus on Core business

Brand building Market development

OEM rubber glove manufacturersto play strategic role to MNCs

Global epidemic diseases(H1N1, Bird flu, SARS)

Increased awareness in

healthcare providers &implementation of higherhygiene standards

and practices

Greater consolidation in

the pipeline

Stronger players to capturevacuum left by exiting smaller

peers

Higher economies of scale

Operational efficiency

Better bargaining power

Trend of increasing healthcarebudgets worldwide

Aging population

US Healthcare Reform Healthcare revamp in developing

countries (China, India)

Healthcare regulation

Key Industry Trends

Half of global supply met by 5 Malaysian companies not a sunset industry

for these big players, the Company is riding on these key industry trends

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Rising Threat ofGlobal Health

Scare

RisingHealthcareExpenditure

Increasing Trendof OutsourcedManufacturers

IndustryConsolidation To

OligopolisticMarket

Industry Challenges


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Latex pricefluctuation

Volatility of rawmaterial pricescontinue toimpact glovemanufacturers.

Prices for NitrileLatex is increased

by 36% from 1Q11to 4Q11.

Currency exposure

Sales proceed inUSD.

USD exchange rateis still weak.

Tighter glovesinspection inmedical sector

More stringent USFDA inspectioncriteria, fromAQL4.0 to AQL2.5at entry startedDecember 2009.

Constrain in powersupply

Limited supply innatural gas posingthreat to capacityexpansions ofMalaysia glovemanufacturers.

Maintaining highest level of sensitivity and awareness on the foresee and

unforeseen industry challenges ahead, adopting contingency strategies tomitigate the impact of the challenges.

Industry Challenges

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Raw Material Price & Forex Trend


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Nitrile Latex Unit price (MYR)

2.00

4.00

6.00

8.00

2007

2008

2009

2010

Jan

Feb

M

ar

Apr

M

ay

Jun

Jul

A

ug

Sep

O

ct

Nov

D

ec

2011

RMAverage USD vs. MYR Forex

2.50

3.00

3.50

4.00

Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

MYR

Average Latex Price from Dec 2007 - Dec 2011

0.0

5.0

10.0

15.0

Dec-07 Dec-08 Dec-09 Dec-10 Dec-11 Dec-12

Sen/kg

Source : www.exchange-rates.org

Source : Malaysia Rubber Board

Persistently rising prices of rawmaterials raising concerns.

Although higher prices effectively

passed to customers . still it is

affecting gloves consumer behaviors

*As at 31 January 2012

Highest3.708

Lowest2.963

*As at 31 January 2012

Highest10.87

Lowest3.350

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Highest6.322

Lowest3.800

Source : Company Data

*As at 31 December 2011

Current6.713

Current3.033

Current4.442


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Strong Growth


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Market share expansion

Growth Strategies

High Performance

Strong Growth by focuses in capacityexpansion and expansion of market

share through market development

Continue efforts on product

improvement, offering and delivering

value to customer

Developing and reaping first mover

advantage with unique positioning thru

innovation and highly demand product

Increase overseas customer base by

participating in trade missions and

building Latexxs image in international

arena, particularly in other regions

besides the North America

Tie-up with more MNCs for OEM

manufacturing by leveraging on existing

experience with Ansell, Cardinal Health

and Kimberly Clark Corporation for

more OEM customers

Strategically venturing into the non-

medical markets in all regions

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Strong Growth


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For futureFor futureconstructionconstruction

Strategic expansion plans with massive land banks of 50 acres, all in one

location, well ahead of the planned capacity expansion, having already

achieved the 2011 target of manufacturing 9 billion gloves per annum, underthe current expansion plan, a total of 89 lines are already in operation.

Plant 1: 28 lines running now

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Product Expansion


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Continuous product improvement and expansion aiming to offer and

delivery more value to customers, sharing the achievement with our

customers.

Successfully launched of2.5 gram nitrile gloves, suitable for the

use in non-medical sectors, lower price compare to lower end NR

powdered gloves, positioning as perfect substitute product forlower end NR powdered gloves in the non-medical sectors, such

as food handling, personal care, beauty care, etc.

Successfully launched of3.0 gram nitrile gloves, suitable for theuse in both medical and non-medical sectors, lower price

compare to lower end NR powdered gloves and is the perfect

substitution for lower end NR powdered gloves

Successfully launched of3.5 gram nitrile gloves, suitable for use

in medical sectors, greater value compare to medical used

natural rubber gloves

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Product Expansion


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Aggressively venturing into the non-medical market and other regions

beside the North America...

Aggressively venturing into the non-medical market, i.e. by

offering the ultra thin nitrile product range to the food handling,

beauty care, personal care, industrial and other non-medicalsectors

Intensify marketing efforts on other regions besides the North

America market, i.e. Europe, Middle East, Japan, India, China, South America, etc..

Adopting high impact penetration into the glove market of these

regions through active participation in trade-shows in bothadvance and emerging regions

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Strategic Positioning with Breakthrough Tech


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Developing and reaping the first mover advantage with unique position thru

innovative and highly demand product, premium quality powder free

natural rubber gloves with unquantifiable protein level target to becommercialized by 2011.

JV with Budev B.V., owner of the breakthrough technology

use to reduce the major allergens that cause protein allergyin natural rubber gloves

Exclusive rights to JV vehicle, Total Glove Company Sdn Bhd

to apply and commercialize the patented method (MPXX) innatural rubber examination and surgical glove

A major breakthrough in the existing global rubber gloves

industry, targeting to commercialize by 2011

Premium pricing, expected to boost earnings and margins by

2012

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Investment Merits


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Centralized location with economies of scale

Effective operation control acknowledged by industry players

Stringent quality control, defect rate of 1%, lower than the

industry average of 1.5-2.5% State of art facilities, 65% of current production lines are less

than 2 years old, remaining upgraded

In-house technology to design highly flexible and high power

machines, equipment and process

Strong and solid

businessfundamentals

Poised to post fastest growth amongst peers, the strategic factors

indicating why invest in Latexx....

Global demand growing faster than expansion of production

capacity

Health scare and best practice awareness to boost demand

Industry prospects

remain bright

Strong recurring income stream attributed by superior network

support with large MNC accounts

Prompt payment resulted in low trade receivables cycle

Healthy cash flow

position

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Investment Merits


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Earnings of 26.07 sen/share in FY09, 31.21 sen/share in FY10,

19.80 sen/share in FY11

Valuation under-

appreciated in view

of earnings growth

The Ultra thin nitrile gloves of 2.5g, 3.0g and 3.5g for the medicaland non-medical sector

The commercialization of the powder free latex gloves with

unquantifiable protein level under the FITkit testing method

Product

Innovativeness

Long-established clientele consisting of world-renowned medical

supply providers, resellers and distributors

Low cost structure gives Latexx cost advantage

Competitive edge over peers powered by high quality standard

Prime beneficiary to the increasing number of MNCs outsourcing

their glove manufacturing businesses

Favorable position as

OEM vendor

Continuous expansion driven by committed management

Future capacity increase enables Group to grab market share in

overseas markets

Well-executed

expansion plan

Rationales why Latexx as an investment choice as today ..

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Awards & Accolades


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Latexxs excellence performance and continuing efforts in creating

shareholder values were proven and acknowledged

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KPMG Shareholder Value Award 2010 MalaysiaNo. 2 in Sector Rank (The Industrial Market-

Manufacturing Sector)No. 21 in Top 100 Rank

Forbes Asia Best Under A Billion Award 2010

Among 9 of the Malaysian companies in the awardlist.

Awards & Accolades


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Latexxs excellence performance and continuing efforts in creating

shareholder values were proven and acknowledged

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Forbes Asia Best Under A Billion Award 2011Among 14 of the Malaysian companies in the

award list.

FinanceAsia Asias Best Managed Companies : India

and MalaysiaBest small-cap.


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Please contact us if you have anyquestions

[email protected]@latexx.com.mywebsite: www.latexx.com.my

THANK YOU


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Latexx Corporate Presentation 4Q2011