Hextar sees strong 1Q from agriculture, consumer improvements

KUCHING: Hextar Global Bhd (Hextar) is off on a good start as it recorded a strong first quarter of the financial year 2020 (1QFY20) from improved performance in its agriculture and consumer products segments.

According to Public Investment Bank Bhd’s research team (PublicInvest Research), Hextar recorded revenue of RM104.6 million (up 27.7 per cent y-o-y, 26.3 per cent q-o-q) on increased contributions from its two key operating segments.

Correspondingly, it noted that the group’s net profit was a higher RM9.5 million (up 53.8 per cent y-o-y, 21.7 per cent q-o-q), the stronger annual gain a result of margin improvements. Excluding foreign exchange movements (1QFY20: RM1.5 million loss, 1QFY19: RM0.6 million gain), net profit would have jumped a more robust 101.8 per cent y-o-y, it pointed out.

PublicInvest Research also highlighted that the Group was also largely unaffected by disruptions in raw material supply (as a result of lockdowns in China) during the quarter as it had stocked up sufficient inventories to operate relatively uninterrupted.

“The Coronavirus Disease 2019 (Covid-19) pandemic has also been a boon to its consumer product segment, driving higher demand for its tissue paper and wet wipes, amongst others,” it said.

While it noted that the group could see slight sequential weakness given the extended MCO, stronger performance in the second half ( 2H) FY20 is expected to mitigate any significant ill-effects.

“Management has also indicated stronger upticks in its export sales, benefitting from the challenges in China,” it added.

On its key segments, PublicInvest Research said, Hextar’s agriculture segment continued to perform well despite the Covid-19 pandemic and MCO which curtailed activity as agrochemicals turned out to be in greater demand during the period to ensure food security.

“Management anticipates steady contributions from the division in the quarters ahead,” it said.

It also pointed out that the consumer products segment turned profitable during the quarter, with benefits from cost efficiencies, as well as increased demand (for wet wipes and tissue papers, amongst others) due to the Covid-19 pandemic.

“Management expects this growth momentum to continue for the year,” it added.

Aside from that, it pointed out that the group’s recent technology-based but plantation-focused venture stands it in strong stead for the future.

All in, the research team maintained its ‘outperform’ rating on the stock.