HEXZA (3298) - Hexza Corporation Berhad - Stronger Footing
Hexza Corporation Berhad (Hexza - 3298) is a low profile company that deals in the manufacturing of chemical products. Sitting in a handy amount of cash pile, the group had been actively in search on investment with recurring income. The latest investment is a buy and lease back of a 8MW fuel oil generation system in Myammar that will provide the group with a 10 years of recurring income that can reap a handsome USD 9.6 million over the tenure.
The global business environment had been very challenging, with fluctuating demand and volatile raw material cost. That being said, the investment environment had become even harder with investor looking for safe haven financial instrument, or asset that can provide a steady recurring income through dividend. With the central banker from economy powerhouse such as ECB and Japan playing with negative interest rate, this had send investor scrambling for asset that can provide foreseeable recurring yield, such as the REIT market.
REIT are quite resilient in nature in a volatile market because of their asset class that generate recurring income through dividend for investor. However, REIT are generally heavily financed with bank borrowings, hence will be very sensitive with the interest rate.
However, to opt towards another vehicle that pay dividend and having a healthy cash position could be none other than Hexza.
The dividend payment for the past 3 years are
2013 - 5 cents
2014 - 4 cents
2015 - 4.5 cents
2016 - 4.5 cents (to be approved in coming AGM)
Current cash level at RM 51.42 million. With another RM 12.34 million of asset that is held for sale, that will beef up cash level back to RM 63.76 million, resemble RM 0.318 of cash per share. Currently, Hexza do not have any liability or debts with financial institution.
Hexza is disposing non performing asset that are incurring losses, and streamline operation and lower down the cost of production. With the latest restructuring and asset disposal, the manufacturing arm is turning in with approximately 10% in gross profit.
In addition, the financial leaseback agreement will also continue to contribute recurring income of RM 4 million for 10 years.
With the healthy cash level and profitable operation in Hexza, it is foreseeable that Hexza will be able to continue it's dividend payment policy for the next 3 to 4 years to come at the range of 4 to 5 cents.
With the cash pile, it is inevitable that Hexza will continue to look for good investment. However, the group will also be looking into restarting it's property development back in Ipoh should opportunity arises.
Other than that, the group will continue to streamline it's chemical manufacturing operation.
Technical Outlook
To summarize, Hexza will be a considered as a good equity that had the characteristic of weathering volatile economy sentiment. With a foreseeable dividend of at least 4.5 cents for the next 3 years, at the price of RM 1.00, this company will still be able to provide a yield of 4.5% to it's shareholder. At RM 1.10, the company is still yielding slightly above 4%.
HEXZA (3298) - Hexza Corporation Berhad - Stronger Footing
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