Kenanga: Proposed acquisition of HJ Unkel Chemicals set to boost Ancom Nylex’s procurement, net profit

KUALA LUMPUR, April 14 — Chemical manufacturer Ancom Nylex Bhd (ANB) is set to increase its net profit by around 1.6 per cent through its proposed acquisition of industrial chemical distributor HJ Unkel Chemicals Sdn Bhd (HJUC), Kenanga Investment Bank Bhd said today.

In a special research report on ANB, the bank said the move is set to enhance the group’s raw material procurement process and it maintains its forecasts of target price at RM1.80 per unit and “outperform” call.

“We are positive on the acquisition which will enhance the group’s procurement process with better raw material control and supply security,” it said in the report released today.

Kenanga said it understands that HJUC will supply input materials such as adjuvant and surfactant which are highly essential to ANB for the manufacturing of its formulated products such as 2,4-D and Glyphosate.

“Hence, ANCOMNY would be able to source the input materials at a lower cost as well as benefit from the chemical distribution business,” it said, referring to ANB’s stock symbol in Bursa Malaysia.

“The acquisition will increase ANCOMNY’s FY24-25F net profit by c.1.6 per cent each,” it said.

Kenanga also said it continues to like ANB for its position as the largest herbicide active ingredients producer in Southeast Asia, a beneficiary of the widening ban on paraquat use, and a proxy to global food production and food security goal.

Kenanga however said its forecast may be affected by a downturn in crop production in key markets, regulatory risk on herbicide active ingredients, and foreign exchange risk.

Earlier this week, ANB announced that its subsidiary Ancom Crop Care Sdn is proposing an acquisition of a 70 per cent equity stake in HJUC from the latter's parent company HJ Unkel (M) Sdn Bhd and another two individuals for RM9 million, which is expected to be completed by the first quarter of the 2024 financial year.

In the deal, HJUC guaranteed that it will make a profit after tax of RM2.5 million for each of the 2024 and 2025 financial years.

HJUC supplies chemical substances to among others the agrochemicals sector, rubber and gloves, and plastic industry.

ANB is a diversified group with dealings in industries such as agricultural and industrial chemicals, public health, polymer, logistics, information technology and media.