https://www.theedgemarkets.com/article/gas-malaysia-lowers-average-selling-price-rm2214mmbtu-1q21#:~:text=14%2FMMBtu%20for%201Q21,-Anis%20Hazim%20Sharudin&text=KUALA%20LUMPUR%20(Jan%2012)%3A,1Q21)%2C%20which%20is%20RM11.
The Edge Markets
Gas Malaysia lowers average natural gas selling price to RM22.14/MMBtu for 1Q21
KUALA LUMPUR (Jan 12): Gas Malaysia Bhd has set the average natural gas selling price for the distribution segment of its unit Gas Malaysia Energy and Services Sdn Bhd at RM22.14 per million British thermal units (MMBtu) for the first quarter 2021 (1Q21)…
Lower natural gas price benefited Glove n steel as both industries are big users of natural gas
Prolong MCO benefit plastic packaging player as snack, biscuit, Milo, instant noodle selling well (all need plastic packaging)
The CEO of Pfizer says the pharmaceutical company's COVID-19 vaccine recipients will "likely" need a third dose between six to 12 months after full vaccination, followed by an annual shot.
HEXTAR (5151) – A leading Agrochemical Player in Malaysia
Highlights:
1. Hextar Group is the leading crop management solutions provider domestically with strong presence globally (export to 30 countries). The main business of Hextar Global Berhad is to provide agrochemical products. The Company offers pesticides, fertilizers, and other related specialty chemicals. Hextar Global serves customers worldwide.
2. On 30th April 2019, Hextar had completed the acquisition of the entire equity interest of Hextar Chemicals Limited (products registration increased to 500). In addition, with Biogas Engineering Sdn Bhd acquisition (completed in Nov 2020) complements their offered services (to process industrial organic wastewater, especially from palm oil mill effluent to harvest energy while providing solution to environment concern). In 2020, Hextar Group increased its product registration from 500 products to 600 products.
3. Agrochemical products are considered as high barrier of entry as every product need to go through registration with the Malaysian Pesticide Board under the Pesticide Act 1974 to ensure the safety and quality of the products as they are used in agriculture. Besides, the new product’s development also requires intensive R&D and some products may need to have patents. It is worth noting that to register new product it will take about two years to pass the test (this exclude R&D time, lab test and field test).
4. Currently Hextar Global is the leader in the Malaysian agrochemical market which it accounted for about 28% Malaysia pesticide market share. Management of Hextar has identified a few strategies to increase their market share to 40% by 2023. It would be done through organic growth and mergers and acquisitions.
(Source: https://www.theedgemarkets.com/article/halex-targets-40-agrochemical-market-share-2023-posthcl-buy)
5. During the 4th quarter of FYE2019, Hextar had signed a distributor agreement with Sumitomo Chemical Vietnam Co Ltd for distribution of the Company’s product in Vietnam, which is predominantly active in its agriculture industry. In addition, Hextar Chemicals Sdn Bhd and Halex (M) Sdn Bhd (both are subsidiaries of Hextar) had accepted various tender awards by major plantation companies for supply of agrochemicals in Malaysia, Papua New Guinea and Liberia for forthcoming year.
6. In March 2021, Hextar has announced the acquisition of the entire equity interest in Chempro Group for RM138m, with annual profit guarantee of RM13m over the next 3 years. The pricing of the acquisition at ~11x earnings multiple, a discount to industry average of 18x. Chempro is a multinational hygiene specialty cleaning expert providing niche specialty chemicals products for cleaning, hygiene and food industry as well as rubber glove industry in Southeast Asia.
7. Favorable Market Environment: Global commodity prices (including palm oil which exceeds RM3500 per ton) increase substantially lead to anticipated good agrochemical sales in this year and beyond for Hextar.
8. Hextar is also expanding business in Indonesia due to its well established business network through Hextar Chemical Limited. Indonesia is the largest palm oil producer in the world with many of their palm oil trees (25 years old) need to be replanted.
9. Hextar business is fall within the essential service. Due to the Covid-19 pandemic, the availability and security of food supply from crops are essentially needed for many countries.
10. The growth of global population over the year and rising income are also driving up food demand. The growing food demand comes with limited agricultural land, which provides opportunity for agrochemical products to improve productivity of agriculture through cost-effective methods such as fertilizers and pesticides.
11. Global agrochemical market is huge, estimated to reach 250B in 2021 and may reach 300 billion USD in 2024. It is still growing steadily in the next 5 years as shown in the Figure below.
Figure 1: Global Agrochemical Market size
Highlights:
1. Hextar Group is the leading crop management solutions provider domestically with strong presence globally (export to 30 countries). The main business of Hextar Global Berhad is to provide agrochemical products. The Company offers pesticides, fertilizers, and other related specialty chemicals. Hextar Global serves customers worldwide.
2. On 30th April 2019, Hextar had completed the acquisition of the entire equity interest of Hextar Chemicals Limited (products registration increased to 500). In addition, with Biogas Engineering Sdn Bhd acquisition (completed in Nov 2020) complements their offered services (to process industrial organic wastewater, especially from palm oil mill effluent to harvest energy while providing solution to environment concern). In 2020, Hextar Group increased its product registration from 500 products to 600 products.
3. Agrochemical products are considered as high barrier of entry as every product need to go through registration with the Malaysian Pesticide Board under the Pesticide Act 1974 to ensure the safety and quality of the products as they are used in agriculture. Besides, the new product’s development also requires intensive R&D and some products may need to have patents. It is worth noting that to register new product it will take about two years to pass the test (this exclude R&D time, lab test and field test).
4. Currently Hextar Global is the leader in the Malaysian agrochemical market which it accounted for about 28% Malaysia pesticide market share. Management of Hextar has identified a few strategies to increase their market share to 40% by 2023. It would be done through organic growth and mergers and acquisitions.
(Source: https://www.theedgemarkets.com/article/halex-targets-40-agrochemical-market-share-2023-posthcl-buy)
5. During the 4th quarter of FYE2019, Hextar had signed a distributor agreement with Sumitomo Chemical Vietnam Co Ltd for distribution of the Company’s product in Vietnam, which is predominantly active in its agriculture industry. In addition, Hextar Chemicals Sdn Bhd and Halex (M) Sdn Bhd (both are subsidiaries of Hextar) had accepted various tender awards by major plantation companies for supply of agrochemicals in Malaysia, Papua New Guinea and Liberia for forthcoming year.
6. In March 2021, Hextar has announced the acquisition of the entire equity interest in Chempro Group for RM138m, with annual profit guarantee of RM13m over the next 3 years. The pricing of the acquisition at ~11x earnings multiple, a discount to industry average of 18x. Chempro is a multinational hygiene specialty cleaning expert providing niche specialty chemicals products for cleaning, hygiene and food industry as well as rubber glove industry in Southeast Asia.
7. Favorable Market Environment: Global commodity prices (including palm oil which exceeds RM3500 per ton) increase substantially lead to anticipated good agrochemical sales in this year and beyond for Hextar.
8. Hextar is also expanding business in Indonesia due to its well established business network through Hextar Chemical Limited. Indonesia is the largest palm oil producer in the world with many of their palm oil trees (25 years old) need to be replanted.
9. Hextar business is fall within the essential service. Due to the Covid-19 pandemic, the availability and security of food supply from crops are essentially needed for many countries.
10. The growth of global population over the year and rising income are also driving up food demand. The growing food demand comes with limited agricultural land, which provides opportunity for agrochemical products to improve productivity of agriculture through cost-effective methods such as fertilizers and pesticides.
11. Global agrochemical market is huge, estimated to reach 250B in 2021 and may reach 300 billion USD in 2024. It is still growing steadily in the next 5 years as shown in the Figure below.
Figure 1: Global Agrochemical Market size
The Edge Markets
Halex targets 40% agrochemical market share by 2023 post-HCL buy
SHAH ALAM: Halex Holdings Bhd, which has obtained its shareholders’ approval to buy Hextar Chemicals Ltd (HCL) for RM596.79 million, expects an “immediate” turnaround after the acquisition, after which it will focus on expanding its market share in the agrochemical…
12. Hextar recorded excellent FY2020 profit (44.5m) performance and it is expected to growth its profit further in FY2021-2023 with rising products demand and coming Chempro acquisition.
13. Healthy balance sheet with high dividend payout ratio (dividend yield of about 3%). Hextar has cash holdings of RM17.3m and net gearing ratio of only 0.19x, giving it ample room to fund the proposed Chempro acquisition which shall drive future earnings growth.
14. Comparatively, HEXTAR's profit margins and valuation are still attractive among its peers. It achieved FY2020 net profit margin of 10.7% as compared to Bursa’s peers (Ancom’s margin 2%, CCM delisted at PE 43x, margin about 4% and Imaspro’s margin 8%).
16. International peers valuation comparison from Japan Sumitomo Chemical PE 60x, Bayer Cropscience PE 51x (listed in India), Bursa’s peer Imaspro PE of 58x and Ancom annualized last 2 quarters PAT PE of 20x (but overall still loss making).
17. Bonus issue: Hextar has announced a 3-for-5 bonus issue, an exercise aimed at rewarding its existing shareholders and may improve liquidity and affordability of its share.
18. Risks: 1. Organic farming: The rise of organic farming might affect Hextar’s business. Actually organic Farming also uses pesticides but they use organic pesticides which these pesticides are produced from some natural substances. 2. Strong USD rate may increase Hextar’s cost due to some raw materials are imported.
Appendix 1: Crop giant Cargill sees tight supplies driving ‘mini supercycle’
(source:https://ceomorningbrief.theedgemalaysia.com/article/2021/0166/World/21/562656#.YG90SyD0yy4.whatsapp)
Disclaimer:
This writing is based on my own assumptions and estimations. It is strictly for sharing purpose, not a buy or sell call of the company and the contents of this report should not be considered as professional financial investment advises or buy/sell recommendations. I strongly encourage you to do your own research and take independent financial advice from a professional before you proceed to invest.
I make no representations as to the accuracy, completeness, correctness, suitability, or validity of any information on my report and will not be liable for any errors, omissions, or delay in this information or any losses and damages arising from its display or usage. All users should read the posts and analysis the information at their own risk and we shall not be held liable for any losses and damages.
13. Healthy balance sheet with high dividend payout ratio (dividend yield of about 3%). Hextar has cash holdings of RM17.3m and net gearing ratio of only 0.19x, giving it ample room to fund the proposed Chempro acquisition which shall drive future earnings growth.
14. Comparatively, HEXTAR's profit margins and valuation are still attractive among its peers. It achieved FY2020 net profit margin of 10.7% as compared to Bursa’s peers (Ancom’s margin 2%, CCM delisted at PE 43x, margin about 4% and Imaspro’s margin 8%).
16. International peers valuation comparison from Japan Sumitomo Chemical PE 60x, Bayer Cropscience PE 51x (listed in India), Bursa’s peer Imaspro PE of 58x and Ancom annualized last 2 quarters PAT PE of 20x (but overall still loss making).
17. Bonus issue: Hextar has announced a 3-for-5 bonus issue, an exercise aimed at rewarding its existing shareholders and may improve liquidity and affordability of its share.
18. Risks: 1. Organic farming: The rise of organic farming might affect Hextar’s business. Actually organic Farming also uses pesticides but they use organic pesticides which these pesticides are produced from some natural substances. 2. Strong USD rate may increase Hextar’s cost due to some raw materials are imported.
Appendix 1: Crop giant Cargill sees tight supplies driving ‘mini supercycle’
(source:https://ceomorningbrief.theedgemalaysia.com/article/2021/0166/World/21/562656#.YG90SyD0yy4.whatsapp)
Disclaimer:
This writing is based on my own assumptions and estimations. It is strictly for sharing purpose, not a buy or sell call of the company and the contents of this report should not be considered as professional financial investment advises or buy/sell recommendations. I strongly encourage you to do your own research and take independent financial advice from a professional before you proceed to invest.
I make no representations as to the accuracy, completeness, correctness, suitability, or validity of any information on my report and will not be liable for any errors, omissions, or delay in this information or any losses and damages arising from its display or usage. All users should read the posts and analysis the information at their own risk and we shall not be held liable for any losses and damages.
Theedgemalaysia
Crop giant Cargill sees tight supplies driving ‘mini supercycle’ | CEO Morning Brief
(April 8): Agricultural commodities are poised for a “mini supercycle” as China’s rampant demand keeps supplies tight, according to the head of a key Cargill Inc trading unit that’s seeing its best results in a decade.
China’s crop-buying spree and dwindling…
China’s crop-buying spree and dwindling…