By renaming to Hextar Industries Berhad recently, SCH (which is 31%
owned by Hextar Holdings Sdn Bhd) is in a better position to market
their products under Hextar brand.
With the issuance of new shares through rights issue, the proceeds of
RM155mil will be used for repayment of borrowings (21% of proceeds) and
working capital use (78%) in the expansion of fertilizers business
(Peninsular Malaysia and Sabah) as well as purchase of industrial
products such as forklifts, batteries, inverters and solar panels.
Even though SCH Group has diversified their business into fertilizer
and equipment rental business, profitability of the group has not seen a
significant improvement mainly due to MCO which impacted the heavy
equipment and equipment rental services. Despite fertilizers business
being an essential services, the profit margin of this segment is still
below average which dragged down overall margin of the Group.
With the support of Hextar brand (being the market leader with 30%
market share in the agrochemical market) and high barrier of entry into
this market due to stringent process for product certification, SCH or
Hextar Industries seems to be in a good position to expand bigger
especially with the placement exercise.
Stock price has been rather stable since September 2020 with minimal discount to NTA.
What's your take on this stock? Let me know in the comment below.
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https://klse.i3investor.com/blogs/HumbledInvestor/2021-03-07-story-h1542063652-_Humbled_Investor_SCH_Group_Berhad_Hextar_Industries_Berhad.jsp
