ANCOMNY: Trading at support

Chemical T to rollout in 4QFY24. Following the resolution of some complications regarding the export of intermediates from China to Malaysia, ANCOMNY's Chemical T production is set to kick-start in 4QFY24. To recap, Chemical T is viewed as a major earnings catalyst for ANCOMNY due to its more lucrative ASP and larger market size. According to the group, Chemical T has an estimated sales potential of approximately RM64m, higher than the combined sales potential of RM36m for Bromacil and Ester. Additionally, the installation of the Chemical S production line in Klang will soon commence and is scheduled for completion in 1QFY25. It is noteworthy that the ASP for Chemical S is expected to be significantly higher, ranging from 2 to 3 times that of Chemical T.

Promising outlook for MSMA. Despite experiencing a decline in sales orders from Southeast Asia due to the dry weather associated with El Niño, ANCOMNY had been able to compensate this setback with higher orders of better-margin products, such as Timber Preservatives from regions like the US and Brazil where wet weather condition prevailed. Looking ahead, management anticipates that orders for MSMA will recover in the coming months owing to Thailand’s depleting inventories. Furthermore, with the ban on Paraquat usage in Brazil resulting in heightened demand for MSMA as a replacement for soybean crops, ANCOMNY is well positioned to capitalize on this event. The company plans to submit label registration for MSMA to for soybean crops in Brazil this year. This development will open new door for the growing soybean market in Brazil, which is significantly larger than the sugar cane market.

Trading at support levels. ANCOMNY is currently trading near the long-term support region of RM1.03-1.05, accompanied by grossly oversold indicators. Further downside is supported by critical levels of RM1.00 (psychological level) and RM0.97. A successful breakout above the RM1.10 resistance will propel the price towards RM1.15-1.20-1.24 levels. Cut loss at RM0.94.

Collection range: RM1.00-1.05-1.07

Upside targets: RM1.15-1.20-1.24

Cut loss: RM0.94

Source: Hong Leong Investment Bank Research - 15 Feb 2024