• Maintain HOLD (TP: RM0.98) Hextar Global Bhd (HGB)’s 9MFY24 core PATAMI of RM49.4mn (+43% YoY) was within our in-house estimates but substantially below consensus expectations, accounting for 75% and 68% of the full year forecast respectively. The group declared an interim dividend of 0.8sen per share, bringing YTD DPS to 1.3sen. This makes up 65% of our FY24F DPS estimate of 2sen and dividend yield of 2.2%. HGB’s 3QFY24 revenue inched up 19% QoQ, thanks to higher contributions from the Fruits and Agrochemical segments. However, PBT declined by 1% QoQ due to margin erosion in the Specialty Chemicals and Fruits segments (refer to table 2). We remain positive on HGB's long-term prospects, as the group is well-positioned for strong growth, supported by its dominant presence in the domestic Agrochemical market and promising opportunities in the Specialty Chemicals business. Additionally, the company’s foray into the Fruit segment is expected to benefit from rising demand for durians across Asia, and thus potentially boosting earnings further. Maintain a HOLD call with an unchanged TP of RM0.98, based on sum-of-part (SOP) methodology.

• Key Highlights. In 9MFY24, revenue and PBT grew by 53% and 50% YoY respectively, driven by stronger contributions from Specialty Chemicals segment and the newly acquired Fruits segment. Management expects stable performance in the durian industry for 2024, due to a single peak season resulting in a balanced market. The growth trajectory for the durian will continue as global demand for "Musang King" durians continues to rise. Additionally, the stabilization of herbicide product prices is expected to benefit the Specialty Chemicals segment.

• Forecast. Unchanged.

• Outlook. We remain positive on HGB’s long-term prospects, supported by its strong position in the domestic Agrochemical market and substantial growth potential in the Specialty Chemicals business. The expansion into the Fruit segment, fueled by rising demand for durians across Asia, is also expected to further support earnings growth. These factors position HGB for sustained long-term performance and profitability.

Source: BIMB Securities Research - 20 Nov 2024