PETALING JAYA: Analysts are positive about Ancom Nylex Bhd
based on its position as the largest producer of active ingredients for herbicides in South-East Asia.
Kenanga Research told clients that it also favours the company as it is benefiting from the widening ban on the use of the herbicide Paraquat.
The research house said the company is also likely to gain from US-China trade tensions while also being a proxy to global food production and rising concerns about food security.
Kenanga Research said the company is now waiting for one more regulatory approval to enable it to market monosodium methanearsonate (MSMA) herbicide product for soybean use. The product is reportedly already popular with Brazilian sugarcane farmers.
“Despite not yet able to promote it, Ancom believes some soybean farmers could already be trying out MSMA on their own.
“As such MSMA volume should grow 10% in the company’s financial year ending May 31, 2026 (FY26) then 15% in FY27 as the final consent is expected over the next few months,” the research house said.
It also noted the company bought three businesses recently, a 70% stake in a formulation company, Colorex, for RM14mil with guaranteed profit after tax (PAT) of RM2.5mil, an 80% stake in Flexis Solutions, a coating specialist, for RM13mil with guaranteed PAT of RM2mil and a 60% stake in a medical/animal care business under H2H Medicare Group for RM5mil, with guaranteed PAT of RM2mil.
Kenanga Research also said that, while the company’s early margins for its 2024 to 2027 export contract to the United States were eroded by high freight rates, the trend could be reversing, leading to the possibility of better margins.
The research house said it was keeping its target price of RM1.20 for the company’s stock, based on 13 times FY26 and FY27 price-earnings ratio (PER), which is at less than half the forward PER of much larger regional agricultural chemical peers.
“The company’s post-results briefing for 1Q26 was assuring, backing our expectations of a sterling earnings recovery in FY26 and growth going into FY27,” Kenanga Research said.
Earlier this week Ancom Nylex reported that its net profit for its first quarter ended Aug 31, rose 51.96% year-on-year to RM20.07mil despite lower revenue of RM447.36mil, thanks to improved margins and cost efficiencies.
At last look, the stock was at 94.5 sen, valuing the whole company at over RM1bil.
Kenanga Research said risks to its “outperform” call include a downturn in crop production in key markets, regulatory risks and foreign exchange volatility.