CSM given “Don’t buy” recommendation: Kim Eng Securities

The tire producer Casumina made a negative earning result last year due to the increasing material costs. Experts from a HCMC-based brokerage expected the firm would likely to cope with more challenges this year and recommended not to buy the stock.

HCMC-based brokerage Kim Eng recommends not to buy CSM this year (Photo:Minh Tri)

The Southern Rubber Industry Joint Stock Company, known as Casumina, said in a finance report that in 2010, its revenue rose 8 percent year-on-year to VND2.7 trillion (US$135 million), while the net profit fell sharply 52 percent year-on-year to VND141 billion.

The negative profit came mainly from the surging rubber price and the dropping domestic auto sales, the Ho Chi Minh City-based tire producer said in the report.

The auto revenue in 2010, declining 6 percent year-on-year to 112,224 cars, caused a sharp decrease in sales of auto tire, which make 45 percent out of the firm’s annual revenue.

The negative earning results saw the revenue growth rate of Casumina plunged by 8.2 percent year-on-year to 8 percent.

Financial experts said the tire maker, which lists on the Ho Chi Minh Stock Exchange with the trading code of CSM, last year coped with more difficulties than in 2009, with lending rate moving up to 14 percent in the last six months of 2010 from 10 percent in 2009.

In 2010, the value-added tax rate on tires of heavy truck was doubled to 10 percent last year as the tax exemption on the product for the firm was expired. Sales of heavy truck tire amount 30 percent of the total revenue of Casumina.

The natural rubber price, which makes around 60 percent of the company’s input costs, increased sharply last year, worsening the earning results.

“Price of RSS3, the major material for Casumina’s production jumped 85.4 percent year-on-year to $4,820. It shows no signs of declining now, while the supply remains limited as bad weathers from 2010 hit rubber farms around the world,” said a broker in a HCMC-based securities company.

Natural rubber cost, meanwhile, has continued to move up 24.5 percent to $6,040 per ton since early this year after surging 85.4 percent last year.

Analysts said the price would keep increasing until next month as rubber trees changing leaves in the autumn would make the supply remain at low level.

The total debt to equity ratio of Casumina decreased to 35.7 percent last year from 68 percent in 2009 as the company improved its balance of finance by repaying a short-term debt of around VND98 billion ($4.9 million).

The tire producer is expected to build a factory producing steel radial tires, of which the first phase of the construction requires an amount of VND885 billion ($44.3 million). The company, meanwhile, has around VND93.2 billion in cash only.

The negative earning results last year combining with expected difficulties in 2011 leaded financial experts of the HCMC-based securities firm Kim Eng to put Casumina into “don’t buy” list.

CSM regained more than 2 percent to close at VND20,200 per share on April 6th. The stock lost 38 percent so far this year.

By Hai Ho – Translated by Vu Minh

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