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HEXTAR INDUSTRIES BHD (0161)- THE NEXT HEXTAR GLOBAL IN THE MAKING?

Today we will look at Hextar Industries Bhd (HEXIND), a company under Dato Eddie Ong Choo Meng’s group of companies.

Dato Eddie Ong (Eddie Ong) entered the limelight last year when he emerged as a major shareholder of Rubberex Bhd. At the time, Eddie Ong was already a household name in the agrochemical sector where he operates Hextar Holdings Sdn Bhd, the country’s largest pesticide producer, founded by his father, Datuk Ong Soon Ho.

Since then, Eddie Ong has ventured into many other investments in several PLCs including Opcom Bhd, Complete Logistics Bhd and Classic Scenic Bhd.

BACKGROUND

HEXIND (formerly SCH Group Bhd) was originally engaged in the distribution and supply of quarry industrial products for the quarry industry. In June 2018, SCH saw the arrival of Eddie Ong after the company acquired TK Tent & Air-Conditioning Rental Sdn Bhd from Hextar Holdings Sdn Bhd for RM50 million.

In the same year, SCH also bought PK Fertilizer Sdn Bhd.  With these acquisitions, SCH Group was able to diversify into the fertilizer and equipment rental business.

In July 2018, Hextar Sdn Bhd increased their stake in SCH to 25%, by buying a 13% stake from Tan Sri Richard Koh and 3 others, making them the majority shareholders. By October 2018, Hextar Sdn Bhd had further raised their stake to 31%.

Since then, it has been relatively quiet on the corporate front for SCH right until March 2021. On 12 March 2021, SCH Group Bhd was renamed as Hextar Industries. If we were to read between the lines, this could mean that Eddie Ong plans to allign the direction of Hextar Industries Bhd together with Hextar Global. A share consolidation of 3 to 1 shares as well as a rights issue exercise was subsequently proposed.

HEXIND registered a net profit of RM 232,000 in the most recent quarter from a net loss of RM 4.31 million a year ago. For the full financial year ending 31 August 2021, the company registered a net profit of RM 1.64 million reversing the net loss of RM 8.32 million in FY2020. However, it is the recent spate of corporate developments that really catches the eye and stirs the imagination!

TECHNICALS

There was a huge spike in the price on the 12 March 2021 possibly from the proposed name change from SCH to HEXIND and the share consolidation exercise. HEXIND hit a 52-week high of RM 0.54 on 15 March 2021 and since then steadily downtrending and hitting a low of RM 0.12 on 21 September after the rights issue (of 5 for 1) date was announced.

Since the new shares from Right Issues were issued on 29 October 2021, the price has finally made a TRIPLE bottom of RM 0.12 and has started to climb upwards. The price structure will improve tremendously if can break above downtrend line (currently at RM0.28) that has held since 15 March 2021.

INTERESTING OBSERVATIONS

1) The “Magic” of Eddie Ong - Stocks owned by Eddie Ong moves big when it is time!

Case Study 1: HEXTAR GLOBAL BHD

Hextar Global needs little introduction. The chart above sums up the whole story! Currently trading at RM1.57, near the all-time high with a market capitalisation of RM 2.06 billion. Eddie Ong has been actively growing Hextar Global through various M&A deals like the purchase of Chempro Group of Companies, the Nobel Group of Companies and most recently, chemical specialty maker, Tufbond Technologies Sdn Bhd. The market has rewarded Hextar Global Bhd with a new highs for each new deal made by Eddie Ong! Adjusted for the bonus issue, Hextar Global is up an astonishing 193% YTD!

Case Study 2: OPCOM BHD

Eddie Ong first acquired OPCOM at RM 0.84 a share for a total of RM 20.69 million from Datuk Seri Mukhriz Mahathir in 10 February 2021. What is interesting to note from the daily chart is that the price actually came off after the announcement of his purchase as it had actually already moved up from RM 0.40 at the beginning of the year.

After consolidating for 7 months, the stock took off in a big way in September 2021 hitting an ALL-TIME HIGH of RM1.79 on 10 October 2021. So, it only took 8 months for the stock to double after Eddie Ong bought into it.

Case study 3: COMPLETE LOGISTICS BHD

Eddie Ong emerged as the largest shareholder of Complete Logistics Bhd on 9 Mar 2021 after acquiring 29.18% stake from Dolphin Assets Sdn Bhd. Although the price was not announced, it should be in the region of RM1.40 based on the tabulated VWAP.

A similar price pattern happened as with Opcom. The price came down after the anouncement of the acquisition and touched a low of RM1.09 by the end of March 2021.

After touching the low of RM1.09 on 26 March 2021 the price has steadily climbed to hit an ALL-TIME HIGH of RM2.57 on 3 November 2021! So again, in another short span of 8 months, the stock has almost doubled after Eddie Ong’s entry!

2) RIGHTS ISSUE EXERCISE

A Rights Issue exercise of 5 for 1 (exercise price of RM0.12 per new share) was completed with the new shares listing on  29 October 2021.  The exercise was oversubscribed by 26%. An interesting point to note is that from the 929 million new shares issued, Hextar Holdings Sdn Bhd actually subscribed for half of the shares at 466 million shares! This has bumped their shareholding from 31% to 47%. At RM0.12 a share costing RM56 million, this represents a huge commitment and stamp of confidence from Eddie Ong and his family towards HEXIND.

3) HEXTAR AS A BRAND NAME

From the name change to Hextar Industries (formerly SCH Group Bhd) on 11 Mar 2021, we can deduce that Eddie Ong could have big plans to diversifying from the legacy quarry business and placing more focus into the agrochemical and fertilizer space. (HEXIND already derives 67% of their revenue from the fertilizer segment)

The allignment and synergies with Hextar Global can only mean good things to come for HEXIND.

CONCLUSION

I believe HEXIND is entering a very exciting and expansionary phase in their business. With the Rights Issue exercise out of the way and the financial commitment made by Eddie Ong and his family holding company to HEXIND, this could be the next stock to really EXCITE THE MARKET in the near future!

At RM0.175 HEXIND seems like a very good entry price given the Rights Issue price of RM0.12 and improving price chart structure!

Will it be the next HEXTAR GLOBAL BHD? Given Eddie Ong’s track record, you would not bet against it and probably would not take that long to find out too!!

Disclaimer: This blog is created for sharing of trading ideas only. It is not in any way or form meant to be an inducement or recommendation to buy or sell any stocks. Consult your financial consultant before making any financial investments.

https://klse.i3investor.com/blogs/thealphatrader/2021-11-09-story-h1593751101-HEXTAR_INDUSTRIES_BHD_0161_THE_NEXT_HEXTAR_GLOBAL_IN_THE_MAKING.jsp

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