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PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 21 Jan 2021, 11:57 AM

 

Hextar Global Berhad - Steady Growth

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The Group reported another set of healthy quarterlies, with 3QFY20 net profit of RM12.5m (+42.6% YoY, +12.3% QoQ) coming on the back of improved penetration in the local market and steady growth in overseas sales for its agriculture segment. Cumulative 9MFY20 net profit of RM33.0m (+77.1% YoY, on a business as usual basis), though only making up 71.2% of our full-year estimates, is deemed in line on expectation of strong quarters ahead owing to healthier plantation industry conditions. We continue to like the Group’s prospects with scope for growth still ample despite it already being the market leader in the domestic agrochemical market space. Management remains open to the merger and acquisition path to augment growth going forward, though there are no developments on that front at this juncture. Our Outperform call is affirmed with an unchanged target price of RM0.91 (15x multiple to FY21 EPS). Separately, the Group declared a third interim single-tier dividend of 1.0sen, bringing year-to-date payout to 3.2sen.

  • 9MFY20 highlights. The Group recorded revenue of RM316.8m (+24.5% YoY), underpinned by strength in the agriculture segment though partly aided by the consumer products segment, the latter an indirect beneficiary of the COVID-19 pandemic. Encouragingly, gross margin improved ~4pps to 22.2% on improved economies of scale. Net profit was correspondingly higher at RM33.0m (+77.1% YoY, on a business as usual basis), though partly weighed by impairment losses on trade receivables amounting to RM1.6m.
  • The agriculture segment continued to drive growth, as agrochemicals remained in high demand owing to the need in ensuring food security. Cumulative 9MFY20 revenue of RM296.0m, (+22.0% YoY) and net profit of RM33.8m (+51.3% YoY) is a result of stronger sales to the local and overseas markets.
  • The consumer products segment slipped into a marginal loss for the quarter owing to restructuring-related costs, though remaining profitable on a cumulative 9MFY20 basis owing to increased demand (for wet wipes and tissue papers, amongst others) due to the Covid-19 pandemic.
  • On its other business areas, acquisition of Biogas Engineering Sdn Bhd has just been completed on 5 November, with management optimistic over its growth prospects. The acquisition comes with an RM3m profit guarantee till end-2021. Earlier this year, the Group incorporated Hextar IOT Sdn Bhd to embark on 5G technology in the plantation industry. There has been no significant headway to-date, though we reckon costs in operationalizing this venture is likely to be relatively minimal, and speed and breadth of rollout fairly expeditious.

Source: PublicInvest Research - 24 Nov 2020

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Labels: HEXTAR

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Chart Stock Name Last Change Volume 
HEXTAR 0.895 -0.015 (1.65%) 1,784,500 

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