Kenanga Research said Ancom Nylex’s earnings guidance for FY25 to FY26 was in line with its estimates.
PETALING JAYA: Ancom Nylex Bhd
is expected to fare better in the financial year ending May 31, 2025 (FY25) and FY26, driven by stronger agri-chemicals contributions on robust timber preservative orders, as well as better sales of monosodium methanearsonate (MSMA) herbicide, along with newer active ingredients (AIs).
Kenanga Research said Ancom Nylex’s earnings guidance for FY25 to FY26 was in line with its estimates.
The research house, which maintained its forecasts, target price of RM1.50 and “outperform” rating, said the company has finally signed a three-year supply contract for timber preservatives in June to a long-standing US customer.
“The customer has already raised its purchase throughout FY24 and orders are expected to stay healthy over FY25-FY26. As timber preservatives enjoy good margins, such orders should translate to better overall profit margins for the agri-chemicals segment,” it added.
Kenanga Research pointed out that Ancom Nylex, which increased its annual MSMA capacity from 12 million to 15 million litres two years ago, is looking to grow MSMA sales from broader application beyond sugarcane to include soybeans in Brazil.
In addition, the company’s entry into Indonesia and potential recovery in Thailand from the need to restock after a dry spell, which had impeded herbicide demand, will help boost its MSMA sales.
Also, its scaled-up production of AI “T” is now scheduled to start after August, after many delays. “As such, more meaningful AI ‘T’ sales should start in FY25 with a full-year impact from FY26,” it added.
Kenanga Research believes the cost streamlining of industrial chemicals to improve from current thin, trading dominated margins will help Ancom Nylex enjoy savings of RM5mil to RM10mil from FY25 onwards.
Meanwhile, the research house expects the reverse takeover of Green Lagoon Technology (GLT) to be incremental to Ancom Nylex’s earnings, as GLT is providing RM8mil and RM10mil profit after tax guarantees for year one and two, after the takeover.
“We continue to like Ancom Nylex for its position as the largest herbicide active ingredients producer in South-East Asia, a beneficiary of the widening ban on paraquat use, a beneficiary of the US-China trade tension as well as a proxy to global food production and food security goals,” it added.
