KUALA LUMPUR: There is ample room for growth for the merger between Halex Holdings Bhd and Hextar Chemicals Sdn Bhd even as the group plans to grow its market share to 40% in the next three to four years.
Initiating coverage on Halex, PublicInvest research said subsequent to Halex acquiring Hextar for nearly RM600mil, the group will have about 30% of the domestic market share, with its closest competitor about 2.6 times smaller.
"The Group is likely to be one of very few significant players with the appetite to consolidate the industry further and to build on its market share," it said.
The agrochemicals market space is valued at about RM800mil domestically and RM2.1bil in indonesia.
PublicInvest noted that the group dominates the market with over 500 branded agrochemical products.
There are also high barriers to entry due to the highly regulated nature of the importation and production of pesticides.
"Stringent registration procedures for a pesticide product could take up to 2 years," said the research house.
It added that the group has other advantages such as an extensive distribution and stable procurement network, a flexible business model that buffers against cost fluctuations and strong R&D capabilities.
PublicInvest initiated coverage on Halex with an outperform call and a PE-derived target price of 95 sen.
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