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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.
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