Condoms, My Love
Many people avoid topics and discussion on condoms but what if condoms can make us some money? I presumed things will then look differently.
Recently, I chanced upon this company, Karex. Karex is a condom producing machine. More than 90% of Karex revenue comes from selling condoms!
Karex is a company that is listed in Malaysia exchange. It started operation way back in 1988 and only got listed recently during 2013. Imagine the amount of experience accumulated by them in dealing with condoms!
Extracting from the pie chart below, the main bulk of Karex revenue comes from the condoms segment.
However, what interest me is the condom segment. Lets drive deeper into the main source of Karex revenue.
Under condom segment, the market distribution can be divided into 3 parts. (The below information can be found at their fact-sheet listed on their website).
Commercial Market – Karex manufacture condoms for customers such as Lifestyle Brand, Durex, Trustex and One. Many of these brands are owned by big and reputable companies like Ansell Limited and Reckitt Benkiser.
Tender Market – Tender to Institutional buyers such as United Nation Population Fund (UNFPA), United State Agency for International Development (USAID), Population Service International (PSI), Marie Stopes International (MSI), John Snow Inc (JSI) and Crown Agents International Limited
Own Brand Marketing – Manufacture condoms under own brands namely “Carex” and “INNO”
Currently, Karex has 3 manufacturing plant that produce more than 5 billion of condoms each year!
To give you a context on how big they are, about 1 out of every 5 condoms in the world is produced by Karex! Karex is also expanding to achieve the ability to manufacture 6 billion of condoms.
Lets look at the S.W.O.T of Karex before we proceed to the numbers. There are definitely more in some part of S.W.O.T but I shall just keep it to 3 for now.
Since Karex was listed, its fundamental was pretty decent.
Although Karex past results was decent but do note that its share price took a beating recently due to its lower profit and higher expenses. However, I feel that this is only temporary. Karex is expanding heavily recently which range from acquisition of companies and also expanding its manufacturing capability. 危机 = 机会, although Karex recent result has been disappointing, it provided me with an opportunity to invest into it. The potential for Karex in the coming years is huge as condom industry is growing and will grow even faster when more people around the world get educated. Especially 3rd world country, who’s government promote and distribute heavily to prevent STD/ HIV and other diseases.
On a hindsight, if technology allows more alternative and cheaper way of contraceptive option than maybe Karex position will need to be assess again. Karex also gives me immerse confidence to see that majority of its founding members are still holding onto shares to the company. This meant that they too, are aligned with us and also have confidence in Karex future prospect. However, as Karex is a family run business, there might a potential chance that they do something dubious without us, the minority shareholders finding out.
Weighing the pros and the cons, I have decided to make Karex a small portion of my portfolio. Karex is definitely a business to hold for a longer horizon, in order to reap the reward from its OBM and the recent expansion that it is currently undergoing.
At the end of the day, 1 question people should ask themselves before investing into stock. Is this a business I would like to own?
