PETALING JAYA: Ancom Nylex Bhd
’s earnings recovery is expected to be underpinned by stronger monosodium methanearsonate (MSMA) sales volumes despite near-term headwinds from elevated freight costs and potential El Nino disruptions.
Hong Leong Investment Bank (HLIB) Research said MSMA orders from Brazil’s soybean market are gaining momentum following label approval in March 2026, with distributors commencing sales across key regions, including Mato Grosso do Sul, Mato Grosso and Goias.
“Shipments are expected to more than double to about 360,000 litres in October to November 2026 (from about 160,000 litres in September), before moderating to about 260,000 litres in December, potentially reflecting shipment scheduling and seasonal ordering patterns among Brazilian customers,” the research house said in a report yesterday.
HLIB Research said assuming an application rate of two litres per ha, Brazil’s about 50 million ha of soybean cultivation represent a theoretical addressable market of about 100 million litres per annum.
The research house said with market penetration currently less than 1%, management targets to reach 1% to 2% market share (translating to one million to two million litres per annum).
“We estimate that every additional one million litres of MSMA sales could contribute about RM4.5mil to RM5mil in net profit, assuming a 40% pre-tax profit margin and an average selling price (ASP) of about US$3,000 per tonne,” HLIB Research said.
The research house said Ancom reported a core net profit of RM22.1mil for the first quarter of financial year 2027, slightly below expectations at 22%/22.7% of HLIB Research’s/consensus full-year estimates, mainly due to weaker-than-expected agrichem contributions.
“Agrichem revenue rose 26.4% quarter-on-quarter (q-o-q) on stronger MSMA and timber sales volumes, but earnings before interest and taxes (Ebit) declined 6.5% q-o-q, partly weighed down by elevated freight costs.
“Meanwhile, industrial chemicals revenue fell 21% q-o-q on lower ASPs following a 16% decline in Brent crude prices, with Ebit declining 28.3% q-o-q,” HLIB Research said.
The research house said potential El Nino stretching towards end-2026 could alter rainfall patterns across key agricultural markets. While adverse weather may increase farmers’ need for crop protection, prolonged droughts or excessive rainfall could also disrupt planting activities and herbicide application.
“Nevertheless, we believe its diversified geographical exposure should help mitigate these risks. MSMA demand from the Brazil soybean market should remain healthy, while Malaysia and Australia could see softer demand with drier weather conditions,” HLIB Research said.
The research house also pointed out that elevated freight rates remained a key concern. Average freight rates to major export destinations surged 141% between January to October 2026 amid the ongoing US-Iran conflict, weighing on agrichem margins due to limited cost pass-through under fixed-price tender contracts.
“Freight rates to North America rose from about US$2,700 per container in February 2026 to over US$8,000 in September 2026, while rates to Brazil/Argentina increased from about US$1,600 to over US$7,000 per container.
“Despite some moderation in October 2026, freight costs remain elevated, although stronger MSMA sales volumes, particularly from Brazil, should partially cushion the margin impact,” HLIB Research said.
Meanwhile, the higher minimum wage to RM2,000 effective June 2027, as proposed in Budget 2027, is expected to weigh slightly on Ancom’s financial year 2028 (FY28) earnings. HLIB Research maintained its “buy” call on Ancom with a target price of RM1.27 pegged to 15 times FY27 earnings per share.
