KUALA LUMPUR (Nov 3): Shares in Karex Bhd hits all time high in the early trades today, amid expectation on the condom maker’s quarterly earnings to beat market consensus for the first financial quarter ended Sept 30.  

Another reason that has triggered the surge in buying interest could be the speculation that Karex might be a takeover target.

In an interview with Bloomberg, Top Glove said it expects to conclude at least one acquisition in the financial year ending Aug 31, to maintain its earnings momentum.

Karex rose as much as 22 sen or 6.21% to RM3.76, shortly after the opening bell. As at 11.30am, Karex was trading at RM3.71, up 17 sen or 4.8%.

Trading volume, however, was thin at barely 435,400 shares exchanging hands, between RM3.58 and RM3.76. At RM3.73, it had a market capitalisation of RM2.37 billion.

Karex is due to announce its first financial quarter ended Sept 30, 2015 (1QFY16) earnings this month.  

RHB Research expects Karex to post better 1QFY16 results, driven by increased operating efficiency, improved product mix and a stronger US dollar.  

RHB Research projected Karex's 1QFY16 earnings to be 18% to 21% higher quarter-on-quarter (q-o-q), on the back of better-than-anticipated operating efficiency improvements, favourable product mix and a stronger US dollar.

"We believed that the increased operating efficiency was primarily led by Karex’s automation drive and the realisation of greater cost scales," RHB Research's analyst Wong Cheng Horng said in a research note.  

"We forecast that net margins would improve to 25.2% for the quarter as compared to 4QFY15's 22%, and earnings to come in around RM20 million to RM21 million, roughly 12% above consensus estimates," he added.  

Wong also noted that the turnaround of recently-acquired Medical Latex Dua SB (MLD) is likely to be faster than anticipated.

"While initially guiding to breakeven within 12 months, management is now confident of a turnaround within three months after bringing down costs," he said.  

RHB Research has revised its target price to RM4.08, from RM3.58.
 
(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)