GEORGE TOWN: Texchem Resources Bhd
will allocate RM220mil to set up 220 Sushi King outlets in Malaysia and Indonesia over the next five to 10 years.
Texchem founder and executive chairman Tan Sri Fumihiko Konishi said the group had recently set up two Sushi King outlets in the suburbs of Jakarta.
The cost of establishing an outlet is about RM1mil.
“We will set up two more in Jakarta in November and December this year.
“In 2025, we will plan 10 more in Jakarta, which is our focus for the next three years. Jakarta has a 30 million population and five big townships,” he told StarBiz.
Subsequently, the group will establish 10 Sushi King outlets in Jakarta and other big cities.
The group expects to establish 150 Sushi King restaurants in Indonesia over the next five to 10 years.
“Subsequently, we will plan to increase the Sushi King outlets in Indonesia to 1,000,” Konishi added.
According to MarkNtel Advisors, a leading market research firm, the Indonesian retail market is estimated to grow at a 4.7% compounded annual growth rate from 2024 to 2030.
The retail sector in Indonesia remains a significant force in Asia, propelled by its vast population and an expanding middle-class group, which has been increasing while having greater purchasing power.
In Malaysia, the plan is to increase Sushi King outlets to 200 from 130 currently.
“The Malaysian market can accommodate up to 200 Sushi King restaurants,” Konishi added.
Headquartered in Penang, Texchem has five core business divisions – industrial, polymer engineering, food, restaurant and venture businesses.
For the second quarter that ended on June 30, its revenue rose 22.6% year-on-year (y-o-y) to RM294.7mil compared with RM240.5mil a year ago.
The double-digit increase was chiefly attributed to higher sales across all its core divisions, resulting in Texchem returning to the black with RM1mil in net profit in the second quarter compared with RM6.3mil net loss a year earlier.
“The second quarter of the 2024 financial results marked a meaningful turnaround, and with this, the group will continue its effort to improve performance,” Konishi said.
The industrial division’s revenue increased 25.5% to RM134.7mil, driven by continuous efforts to improve sales.
The revenue from the polymer engineering division jumped 35.2% to RM56.9mil following the recovery in the semiconductor, hard disk drive and medical life sciences sectors.Meanwhile, the food and restaurant segments posted a top-line increase of 17.3% and 10.6%, reaching RM32.5mil and RM69.6mil, respectively.
“Zooming into our polymer engineering division, the mass production of specific strategic projects, which began in the last quarter of 2023, are gaining momentum and have started to contribute positively to the group.
“On the other hand, the business operating environment for the food and restaurant divisions remains challenging.
“However, the restaurant division’s continuous initiatives to address the adversities have started to show results,” he pointed out.
The revenue for the first half of the 2024 financial year was 12.1% higher year over year at RM570.4mil compared with RM509mil in the previous year, due mainly to improvement in the industrial and polymer engineering divisions.
The bottom-line performance also improved, as the net loss for the period narrowed to RM400,000 compared to RM6.5mil in 2023.
According to RHB Research, the worst is over for Texchem with a sustainable turnaround expected, driven by further volume recovery.“We anticipate a stronger 2H24, driven by improving seasonality and positive developments in the consumer sector, which could benefit the unit’s target market.
“Meanwhile, the food division may continue to face challenges due to foreign exchange control measures in Myanmar, but management plans to stimulate local demand and diversify the supply chain away from there to mitigate this impact,” the research house added.
The key growth drivers include a strong earnings rebound from its polymer engineering division, buoyed by continued volume recovery and new business contracts from hard disk drive and semiconductor customers as well as steady growth from medical life science clients.
“The industrial unit is also experiencing a sales volume recovery on easing customer inventory adjustments and stabilising chemical prices.
“Management is also seeing demand spillover to Asean from China due to the US-China trade war, and is working to capture this market share,” RHB Research pointed out.
It added that Texchem has also enhanced its operational efficiency whereby its restaurant division has achieved breakeven via cost optimisations, and increasing marketing and promotional efforts to boost sales.
The research house said Texchem’s 1H24 results met expectations boosted by a strong rebound in the polymer engineering division and gradual improvements across other business units.
Texchem’s 1H24 earnings before interest, tax, depreciation and amortisation (Ebitda) margins expanded slightly by 0.1 percentage point to 6.9%, with margins improvement in these divisions from higher sales and operating leverage, offset by increased input and operating costs in the food and restaurant division.
RHB Research maintained its “buy” call with a target price of RM1.44, which implies a blended 11.5 times FY25 price over earnings multiple.
“The current valuation is appealing in view of Texchem’s well established and diverse businesses with sturdy balance sheet and strong cash flow generation,” it added.
Malaysia’s retail sector recorded a better-than-expected growth rate of 7.8 % in retail sales in the first quarter compared with the same period in 2023, according to Retail Group Malaysia (RGM).
RGM added that the food and beverage sector continued to perform well in the first quarter of 2024, driven by festive celebrations and school holidays.
According to RGM, the cafes and restaurants grew 7.4 % and takeaway outlets had seen a 9.7% increase.
RGM expects a 2.5% growth in the retail sector for the third quarter and a 3.2% increase in the fourth quarter.
