PETALING JAYA: Hexagon Holdings Bhd's share price has risen by about 30% in the past month or so on positive news flow and potentially higher revenue driven by the expansion of oil giants into the retail segment in emerging Asian markets, said analysts.
Standard & Poor’s (S&P) in a recent report said with its established relationships, Hexagon's engineering segment had been garnering petrol station signage contracts to boost earnings.
Hexagon is a provider of engineering, procurement and construction services for the semiconductor, oil and gas and petrochemical industries. It also manufactures petrol signages for oil giants such as Shell and ExxonMobil.
The company’s shares have been outperforming the market.
S&P said the price movement might have been sparked by positive news of the company securing more contracts for overseas petrol station signages, with the latest having potential revenue of RM65mil over the next three years.
“This development provides greater certainty to Hexagon’s earnings as its contracts have tended to be shorter in nature,” S&P said, noting that the company had added about RM170mil to its order book over the past four months.
A senior analyst with a local bank-backed brokerage said: “Hexagon, with its steady stream of overseas contracts and the presence of Robert Kuok as substantial shareholder, makes it a favourite among investors, especially of late.
“The possibility that it may list its petrol retail services business on the London Stock Exchange's Alternative Investments Market in future to raise capital and to reduce its net gearing is also another attractive factor.”
The analyst added that there was market talk that Kuok might raise his stake of about 17% in the company, adding that this could be sustaining market interest in the counter.
The analyst, who said the counter’s current share price was “within expectations”, believes that there was room for further upside on the back of these factors.
S&P, however, feels that the sharp price increase had already discounted much of the good news.
“We believe that risks versus rewards are higher, as there may be potential dilution from a possible equity-raising exercise,” the research outfit said.
Hexagon was the top gainer yesterday, closing at a new 52-week high of RM3.94.