INVESTMENT MERIT
- A wide clientele
network nationwide. TEXCYCL is
primarily involved in the environmentally friendly waste management business,
which collect recycle materials such as rags, wipes, gloves and container, from
over 2000 clienteles nationwide. The key sectors focused by the company are
mostly in electronics, engineering, automotive, printing and the oil & gas
industries. We believe the wide clientele ensures a stable collection of wastes
to the group as it would not be dependent too much on a particular industry/market
to secure its scheduled wastes.
- Current plant is
running at full capacity. The group’s existing one acre plant located in
Taman Perindustrian Kinrara (Puchong) is currently running at full capacity
according to management. We understand that the plant has been awarded 11 types
of scheduled wastes code by the Department of Environment (“DOE”).
- Aiming to construct
a new plant in 1H13. In view of the capacity constraint in its current
plant, the group has acquired an 8-acre land in Teluk Gong, Klang in May 2012
for RM6.7m. Management is aiming to construct a new plant in 1H13, subject to receiving
all the necessary approvals from the relevant authorities, on the first 3 acres
of the land with the balance retained for future plant expansion. We understand
that management is targeting to apply more scheduled waste codes under the
renewable-energy category and manufacturing sectors for its recycling business.
The new waste codes are expected to further improve the group’s revenue from
the recycling business.
- There is no special
dividend in the pipeline despite the group recording a total net gain of
RM4.4m in 1H12 from the disposal of two pieces of industrial lands as
management intends to utilise the disposal gains for future capex and working
capital purposes.
- Consistent dividend
policy. The group have consistently rewarded
its shareholders since its debut on Bursa Malaysia in July 2005, having
declared a yearly 5% dividend per share (or 0.5 sen per share) since then,
which translates into a 1.6% dividend yield. Going forward, we understand
management intends to maintain this current dividend policy.
- Fully Valued.
TEXCYCL is currently trading at 10.2x FY13 PER, which is much higher as
compared to an average FTSE Bursa Malaysia Small Capital Index (“FBMSC”)
forward PER of 7.5x. FULLY VALUED.
SWOT ANALYSIS
- Strength: Wide clientele network nationwide, awarded ISO
14001 by SIRIM Malaysia
- Weaknesses: Small market capitalisation
- Opportunities: Tapping into other type scheduled waste
recycling business e.g. base oil, engine oil, etc.
- Threats: Regulatory risks, political risks
TECHNICALS
- Resistance: RM0.375 (R1), RM0.425 (R2)
- Support: RM0.275 (S1), RM0.225 (S2)
- Comments: Though illiquid, TEXC's share price has been on
a mild uptrend over the past two years. We reckon that a strategy may be
developed whereby traders look to buy at 27.5 sen and targeting the 35 sen
resistance.
BUSINESS OVERVIEW
Tex Cycle Technology (M) Bhd (“TEXCYCL” Bursa Code: 0089)
was founded in 1984 and listed on the ACE Market of Bursa Malaysia on 27 July
2005. TEXCYCL is primarily engaged in an environmentally friendly Waste Management Business which
provides professional services preferred by companies from the various
industries, mainly of the Electronics, Engineering, Automobile, Oil & Gas
and Printing industries in accordance with the Environmental Quality Act. In
2003, the group was awarded the ISO 14001 certificate by SIRIM Malaysia.
Currently, TEXCYCL has over 2000 clienteles network nationwide, with some of
its big clients being Gardenia, Proton, Perodua, Western Digital, Motorola and
etc.
BUSINESS SEGMENTS
Its principal activities are mainly categorised into three
major divisions, namely
- Recovery and
recycling scheduled wastes e.g. rags, wipes and gloves
- Manufacturing and
marketing of chemical products
- Trading of chemical
products, e.g. agro-cultural chemical products
Source: Kenanga
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