PublicInvest Research

Author: PublicInvest   |   Latest post: Fri, 22 Nov 2019, 11:33 AM


HEXTAR GLOBAL BERHAD - Non-Core Asset Disposal

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The Group announced overnight the proposed disposal of a freehold plot of land with associated buildings for a total cash consideration of RM30m. The move is in line with internal reorganization plans with regard to its production operations, with proceeds from the disposal used to retire loans of the Group. We are neutral on this development, though we welcome the resultant reduction in interest expenses from the paring down of debt. With no material impact to earnings aside from a marginal disposal loss of RM90,000, we leave our estimates unchanged. We continue to look forward to FY20 growth, underpinned by the Group’s current dominance of ~30% of the domestic agrochemical market space, and the immediate target of growing its market share to 40% in the next 3 to 4 years via organic means and mergers/acquisitions. With scope for growth still ample, we affirm our Outperform call with an unchanged PE-derived target price of RM0.95 (16x FY20 EPS).

  • The property in question is a 4.5-hectare plot of land located in Ulu Tiram, with a single-storey detached factory and an annexed double storey office building on it. Initially acquired for RM10.1m in 2006 by Halex Woolton (M) Sdn Bhd, the property was subsequently transferred to Halex Link Sdn Bhd at the price of RM31m in 2017. The property has however been left vacant following the consolidation and move of the company’s manufacturing operations to Taruka (Johor Bahru) in February this year. With neither immediate plans for the resumption of manufacturing at Ulu Tiram nor immediate and/or future plans to utilize the premise, a decision was taken by the Board to dispose of it.
  • Utilization of proceeds will first be for the repayment of term loans taken on the property, with the balance used for repayment of inter-company advances and/or working capital. Total borrowings are anticipated to fall by about RM22m (as per the Group’s illustrative guidance), and gearing levels halved. Expected loss arising from the disposal is a marginal RM90,000, after taking into consideration expenses in connection with this exercise and the reversal of deferred tax previously provided for the property.

Source: PublicInvest Research - 22 Oct 2019

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