Kenanga Research said the appointment of two directors by Helm to the board suggests strong commitment towards “more strategic and collaborative efforts”.
PETALING JAYA: Agrichemicals producer Ancom Nylex Bhd
may be up for a potential re-rating following the emergence of Germany-based Helm AG, one of the largest privately-held industrial chemical firms in the world, as a major shareholder in the company in September 2024.
Helm has a 15.1% stake in the company while Ancom Nylex executive vice-chairman Datuk Siew Ka Wei has a 12.8% stake and group chief executive officer and managing director Datuk Lee Cheun Wei has an 8.7% stake.
Kenanga Research said in a report that the prospects of a re-rating have increased as Helm’s investment “is not only a vote of confidence for Ancom Nylex, but a partnership that could have long-term positive strategic implications”.
The research house also added that the appointment of two directors by Helm to the board suggests strong commitment towards “more strategic and collaborative efforts”.
It said the partnership would reap positive benefits for the company’s earnings after the financial year ending May 31, 2025 (FY25), given Helm’s access to markets in North America and Europe, as well as expertise and new products.
While Kenanga Research has lowered Ancom Nylex’s target price to RM1.40 from RM1.50 due to a 24% lower net profit in FY25 on higher freight charges, it has kept the FY26 net profit forecast intact in view of the likely faster rollout of agrichemicals to Brazilian soybean farmers that would help cushion tapering but still higher-than-usual freight charges.
The research house has maintained an “outperform” call on the stock, noting that the company would halve its RM250mil debt from the RM126mil in proceeds from reselling 30 million treasury shares and the issuance of 96 million shares to Helm, which would save it RM4mil to RM5mil in annual interest expense.
It also noted that the operational fit between Ancom Nylex and Helm can be leveraged upon, given that more than 95% of Ancom Nylex’s profit comes from manufacturing agrichemical active ingredients, while Helm’s strength lies in marketing and distributing industrial chemicals and some agrichemicals.
Ancom Nylex would also be able to leverage on Helm’s fertiliser products, which the company lacks.
Kenanga Research pointed out that the company would also be able to leverage Helm’s network in Brazil to widen its market share to soybean farmers, in which it currently only sells to sugarcane farmers.
