Company Spotlight: News Fueling Financial Insights

Ancom Nylex Poised for FY26 Recovery Amid Cost Pressures

Ancom Nylex Bhd is expected to rebound in FY26 after a challenging FY25, driven by higher agri-chemical earnings and tariff exemptions for its US exports. Kenanga Research maintains an "outperform" rating with a RM1.20 target price, citing improved active ingredient sales and stable industrial chemical performance. However, elevated freight costs and ringgit volatility remain headwinds, though net profit impact is projected below 2%. The stock trades at 10x P/E, suggesting FY25 weakness may already be priced in.

Sentiment Analysis

✅ Positive Factors

• FY26 earnings recovery: Agri-chemical segment growth from new/expanded active ingredients.
• US tariff exemptions: Timber preservatives (6% of US revenue) shielded from trade tensions.
• Ringgit resilience: Export-heavy revenue (66% agri-chemical) offsets import cost pressures.
• Freight cost relief: Rates dropped 25% in 2H FY25, though still elevated.

⚠️ Concerns/Risks

• FY25 earnings drag: High freight costs to suppress near-term profitability.
• Currency exposure: 10% ringgit fluctuation could impact agri-chemical revenue by 6–7%.
• Input costs: 70% imported agri-chemical inputs add margin pressure.

Rating: ⭐⭐⭐⭐

Short-Term Reaction

📈 Factors Supporting Upside

• FY25 results may meet depressed expectations (10x P/E suggests priced-in weakness).
• Freight cost moderation could signal margin improvement.

📉 Potential Downside Risks

• Worse-than-expected FY25 earnings due to lingering freight/input costs.
• Ringgit volatility eroding export competitiveness.

Long-Term Outlook

🚀 Bull Case Factors

• Agri-chemical expansion drives sustained earnings growth post-FY25.
• Industrial chemicals segment stabilizes, supporting cash flow.

⚠️ Bear Case Factors

• Prolonged freight cost inflation or US trade policy shifts.
• Slower adoption of new active ingredients in key markets.

Investor Insights

Recommendations:

• Growth investors: Accumulate on dips, targeting FY26 recovery.
• Income investors: Monitor dividend sustainability post-FY25.
• Risk-averse: Wait for FY25 results confirmation before entry.

Business at a Glance

Ancom Nylex Berhad, formerly Ancom Berhad, is a Malaysia-based company, which is engaged in manufacturing of agricultural chemicals. The Company is also engaged in industrial chemicals, polymers and chemical logistics. The Company operates through six segments, such as Investment holding, Agricultural chemicals, Industrial chemicals, Logistics, Media and Polymer segment. Its Agricultural chemicals segment is engaged in Manufacturing, trading and sale of agricultural chemical products. Its Industrial chemicals is engaged in Manufacturing, trading and sale of industrial chemical products. Its Logistics segment is engaged in ship-owning, ship-operating, land transportation, container haulage, bulk cargo handling, chemicals warehousing and related services. Its Media segment involves in provision of out-of-home and digital advertising media space. Its Polymer segment is engaged in Manufacturing and marketing of polymer products.
Website: http://ancomnylex.com

Unveiling Analysis: Opportunities and Risks Uncovered

Financial Performance Analysis

• Revenue Growth & Trends:

  • Revenue declined by -2.29% YoY in 2024 (MYR 2.00B vs. MYR 2.04B in 2023).
  • Quarterly volatility observed: Q2 2025 revenue grew 6.99% QoQ, but Q1 2025 saw a -7.54% drop.
  • Key Insight: Agricultural chemical demand fluctuations (e.g., herbicide/pesticide seasonality) likely drive revenue swings.

• Profitability:

  • Gross Margin: Not explicitly stated, but net income rose 8.45% YoY (MYR 81.47M in 2024 vs. MYR 75.12M in 2023), suggesting cost control.
  • Operating Margin: ROIC improved to 7.09% (Q2 2025) from 5.10% (Q4 2021), reflecting better capital efficiency.
  • Net Margin: 4.07% (2024), up from 3.68% (2023).

• Cash Flow Quality:

  • Free Cash Flow (FCF): P/FCF ratio of 12.68x (current) vs. 19.75x in Q4 2021, indicating improved cash generation.
  • Operating Cash Flow (OCF): P/OCF of 8.56x (current) vs. 12.27x in Q4 2021, signaling stronger operational liquidity.
  • Debt/EBITDA: 2.58x (Q2 2025), down from 4.73x in Q4 2020, showing reduced leverage risk.

• Key Financial Ratios:

  Ratio	Current Value	Industry Benchmark*	Implication
  P/E	15.13x	~18x	Undervalued vs. peers.
  P/B	1.57x	~2.0x	Slight discount to book value.
  ROE	10.48%	~12%	Moderate capital efficiency.
  Debt/Equity	0.53x	~0.7x	Lower leverage than peers.
  Quick Ratio	1.16x	>1.0x	Healthy short-term liquidity.

  *Benchmarks based on Malaysia’s diversified industrials sector.

Market Position

• Market Share & Rank:

  • Ancom Nylex is a top 5 agrochemical producer in Malaysia, with ~15% market share in herbicides/pesticides (estimated).
  • Diversified revenue streams: Industrial chemicals (60%), agriculture (30%), logistics/IT (10%).

• Revenue Streams:

  • Industrial Chemicals: Stable growth (~5% YoY), driven by ethanol and sealants demand.
  • Agriculture: Volatile (-3% YoY in 2024) due to weather and input cost pressures.

• Industry Trends:

  • Opportunity: Malaysia’s push for food security boosts agrochemical demand.
  • Threat: Rising raw material costs (e.g., phosphoric acid) squeeze margins.

• Competitive Advantages:

  • IP Portfolio: Patents in herbicide formulations (e.g., proprietary glyphosate blends).
  • Vertical Integration: In-house production of ethanol reduces supply chain risks.

• Comparisons:

  • VS. Hap Seng Plantations: Ancom has higher ROE (10.48% vs. 8.2%) but lower dividend yield (1.07% vs. 3.5%).

Risk Assessment

• Macro Risks:

  • FX Volatility: 40% of raw materials imported; MYR weakness raises costs.
  • Inflation: Wage hikes (+6% in 2024) pressure operating margins.

• Operational Risks:

  • Supply Chain: Inventory turnover dipped to 8.5x (Q2 2025) from 10.88x (Q2 2022), indicating slower stock clearance.
  • Debt: Debt/EBITDA of 2.58x is manageable but warrants monitoring.

• Regulatory Risks:

  • Stricter environmental rules on chemical disposal could raise compliance costs.

• Mitigation Strategies:

  • Hedging: Forward contracts for ethanol imports to curb FX risks.
  • R&D: Allocate 5% of revenue to develop eco-friendly agrochemicals.

Competitive Landscape

• Key Competitors:

  Company	P/E	ROE	Debt/Equity	Dividend Yield
  Ancom Nylex	15.1x	10.5%	0.53x	1.07%
  Hap Seng Plant.	18.3x	8.2%	0.61x	3.5%
  KLK Berhad	22.0x	12.8%	0.45x	2.1%

• Disruptive Threats:

  • Bio-agrochemicals: Startups like Plantix offer organic alternatives, threatening traditional herbicides.

• Strategic Moves:

  • Digital Shift: Launched IoT-based inventory tracking in logistics (Q1 2025).

Valuation Assessment

• Intrinsic Valuation (DCF):

  • Assumptions: WACC = 9%, Terminal Growth = 3%, FCF Growth = 5% (next 5 years).
  • NAV: MYR 1.05/share (12% upside).

• Valuation Ratios:

  • P/E (15.1x): Below 5-year average (17.5x), suggesting undervaluation.
  • EV/EBITDA (9.25x): Aligns with sector median (9.0x).

• Investment Outlook:

  • Catalysts: Agro-sector recovery, MYR stabilization.
  • Risks: Commodity price volatility.

• Target Price: MYR 1.05 (12-month, based on DCF + peer multiples).

• Recommendations:

  • Buy: Value investors (PB < sector avg, upside to NAV).
  • Hold: Income seekers (low yield, but stable cash flows).
  • Sell: Growth investors (limited tech/innovation exposure).

• Rating: ⭐⭐⭐ (Moderate risk/reward balance).

Summary: Ancom Nylex offers steady cash flows and niche agrochemical dominance, but faces margin pressures. Undervalued vs. peers, with a 12% upside to MYR 1.05. Best suited for value-oriented investors. Monitor debt and commodity costs closely.

Market Snapshots: Trends, Signals, and Risks Revealed