Ancom Nylex to register stronger revenue in 2H24

PETALING JAYA: AmInvest Research expects Ancom Nylex Bhd to register a stronger revenue and profit in the second half of financial year 2024 (2H24) compared with 1H24.

This will be supported by potential monosodium methanearsonate (MSMA)-related trade diversions and commercialisation of Product T, the research house noted.

Following the group’s recent results briefing, AmInvest Research said it has maintained its financial year 2024 (FY24) to FY26 earnings on the chemical products manufacturer.

It has also kept a “buy” call on Ancom with an unchanged fair value of RM1.44 per share.

“Ancom has guided that a prospective cash dividend is still possible in FY24 following its recent one-for-100 dividend-in-specie announcement.

“Hence, we maintain our dividend per share assumption of 1.5 sen for FY24, two sen for FY25 and 2.5 sen for FY26.

“Nevertheless, Ancom highlighted that capital expenditure-driven expansionary activities will be prioritised if any emerge,” said AmInvest Research in its latest report.

Meanwhile, the group’s Product T, with an initial capacity of 1,000 tonnes per annum, which can be scaled up to a max 3,000 tonnes per annum, should be commercialised by March to April this year.

This is much later than the initial target of December 2023 or January 2024, the research house added

“The delay was mainly in allocation of HS codes for Product T intermediates by both Chinese and Malaysian customs offices since these intermediates have never been exported and imported from and to these countries.

“Nevertheless, this issue has now been resolved and the intermediates will be delivered by end-January 2024,” AmInvest Research added.

For Product S, with an initial capacity of 500 tonnes per annum, which can be scaled up to a max 1,500 tonnes per year, Ancom group has guided that the equipment installation is now scheduled to be completed by the third quarter of this year (3Q24), instead of 1H24 due to the launch delay of Product T.

“Hence, we believe the commercialisation will begin in 2Q25.

“We estimate that FY24 to FY25 earnings shortfall caused by these delays could be lower by 2%,” it noted.

Nevertheless, this could be fully offset by prospective new orders for MSMA-related products in March 2024, due to trade diversions from the sole MSMA competitor in Israel amid the ongoing Gaza and Israel conflict, which started on Oct 7 last year.

Separately, the recent attacks in the Red Sea have caused a significant disruption to global logistics, leading to a surge in sea freight rates.

For example, the rates from Malaysia to Brazil rose two to three times per 20-ft container.

On a positive note, Ancom can pass on most of the higher logistics cost to customers, said AmInvest Research.