Background and Core Business

Luxchem’s origins can be traced back to 1984 when it began operations as a sole proprietorship dealing in the marketing and distribution of synthetic rubber, rubber chemicals, Unsaturated Polyester Resins (UPR), fiberglass materials and polymer-related products. Luxchem was then incorporated in 1991 and finally went public listed in 2008.

Today, Luxchem’s market capitalisation stands at around RM 468 million. They are categorised under the Industrial Specialties industry, and belong to both the Trading & Services and Fledgling Index in Bursa Malaysia.

Luxchem owns 5 distinct subsidiaries, namely Luxchem Trading Sdn Bhd, Luxchem Polymer Industries, Chemplex Composite Industries Sdn Bhd, Luxchem Trading (S) Pte Ltd and PT Luxchem Indonesia. Luxchem Polymer Industries owns and operates a Resin plant using Japanese technology that manufactures up to 20,000 metric tons per annum of UPR under their proprietary brand name of POLYMAL. The other subsidiaries deal with the marketing and distribution of products related to the Rubber, Latex, Fibreglass, Reinforced Plastic, PVC, Brakes, Coatings and Ceramics industries. Overall, the industrial chemical products manufactured and marketed by Luxchem have far reaching applications and are regarded as essential raw materials for the aforementioned industries.

Luxchem also has exposure to export markets including Thailand, Singapore, Indonesia, Vietnam, Philippines, Japan, Bangladesh, Sri Lanka, Pakistan, China, Australia and the Middle East.

Financial Brief and Ratios (Historical)

The revenue, net earnings and EPS for the Trailing Twelve Months (TTM) of Luxchem seem to indicate a positive trend. Quarter on quarter growth is still intact. As a matter of fact, latest 2^nd quarter results show a 33% increase in net profit.

ROE for Luxchem appears attractive at 22.66. An interim dividend payout of 2.5 sen has also been declared recently, with the stock going ex-dividend on 9^th September 2016, making dividend yield at about 3.80% TTM. For the record, Luxchem has been rewarding its long term investors with dividends of not less than 5 sen since 2008, even up to 9 sen in FY2011. Dividend yields for FY2015 were around 5.38%.

Luxchem maintains a pretty healthy balance sheet, and are virtually debt free. They are also positively geared (Total Debt Equity Ratio 0.001). The company enjoys positive cash flow from their operations and is low on capex, therefore making overall free cash flow positive. The Cash and Current ratio thus reflects their stable financial position.

They are currently in their 3^rd quarter for the FY2016. Next quarterly results announcement should be on the month of Oct 2016 for Q3 results.

iVolume Spread Analysis (iVSA) & comments based on iVSAChart software – Luxchem

This is the 6-month weekly iVSAChart for Luxchem dating back to Feb 2016. It shows a period of sideways consolidation followed by a sell-off in May and June 2016 as signalled by Signs Of Weakness (Red arrows). The stock then found its bottom at a pivot low of about RM1.40 in July 2016.

Volume was appreciably low at this point suggesting that the bears were exhausted and supply was drying up. Due to the absence of supply, strong hands had emerged to mark prices up, even under relatively light volume. Signs Of Strength (Green arrows) started to appear from 3^rd week of July 2016 and this past week (coupled with high weekly volume).

It is anticipated that prices will return to the previous trading range established since February 2016 and we may see prices trending up further from this trading range if good financial results are achieved for the next quarter.

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