KUALA LUMPUR (April 12): AmInvestment Bank Bhd has maintained its ‘buy’ call on Lee Swee Kiat Group Bhd (LSK), with an unchanged fair value of RM1.39 per share, based on financial year ending Dec 31, 2024 (FY2024) target price-earnings (P/E) of 12.8 times.

The investment bank in a research note on Friday maintained its FY2024-26 earnings forecasts, mainly underpinned by LSK's guidance that the group had implemented hedging measures since late 2023 to mitigate raw material cost increases, despite the average latex price spiking up 24% quarter-on-quarter in the first quarter of 2024 (1Q2024).

"The 1Q2024 average latex price spiked up 24%, mainly boosted by demand and supply factors, including rising demand for Chinese automobiles, specifically electric vehicles, heavy rains in Thailand adversely affecting rubber harvesting activities in December 2023, and disruptions in shipping routes, particularly in the Red Sea region," it said. 

The research house said the impact on the group's 1Q2024 net margin will not be material.

"In addition, we expect latex prices to peak in May, coinciding with the conclusion of the winter season," it said. 

Going into FY2024, AmInvestment Bank continues to favour LSK for being the largest natural latex mattress manufacturer in Malaysia, its expanding market share of natural latex mattresses against domestic peers, recovering export markets, and the recent introduction of a lower-priced A-series mattress.

At Friday's lunch break, LSK’s share price was unchanged at 91 sen, with 305,000 shares changing hands on Bursa Malaysia.

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