• Maintain BUY on Ancom Nylex (Ancom) with an unchanged fair value of RM1.46/share, pegged to 12x FY25F P/E - its 3- year historical mean. No change to our 3-year ESG rating.
• Ancom announced that it will undertake a private placement to raise up to 10% of its total shares in issue. The salient points are listed below:
  • Sole placement to HELM AG
  • Issue price of RM1.00, to raise RM96.2mil, and
  • Target completion date - end of 4Q2024
• HELM AG is a German based family-owned conglomerate, with business interests in chemicals, crop solutions and energy materials. The financial details on HELM AG are not available due to its private corporate profile.
• This partnership may benefit Ancom from a co-branding perspective and tap into HELM AG's established portfolio in active ingredients and crop protection formulations. It will take time for any benefits to crystallise, in our view.
• In addition, Ancom also announced a second interim dividend of 1 sen/share, and distribution of treasury shares of 4 treasury shares for every 100 ordinary shares. In aggregate, this amounts to 5 sen/share.
• The monies raised from the private placement will be used to reduce Ancom's debt and for working capital needs. This will help to reduce Ancom's current debt of RM382mil and reduce interest costs.
• We keep FY24F earnings unchanged and adjusted balance sheet for the capital injection. Our fair value of RM1.46/share will be adjusted to RM1.33/share post-10% dilution from the issuance of new shares.
• The stock trades at 8.4x FY25F P/E and EV/EBITDA of 4x, which is unjustifiably cheap considering it is forecasted to deliver a robust 3-year forward earnings CAGR of 22% and high-teen ROEs.

Source: AmInvest Research - 24 Sep 2024