KUALA LUMPUR: Hong Leong Investment Bank Bhd (HLIB Research) expects Ancom Nylex Bhd's industrial chemicals business to remain supported in the near term by elevated Brent crude oil prices.
However, the earnings uplift could moderate from the second quarter of financial year 2027 (FY27) if oil prices ease following any de-escalation of tensions involving Iran, said its analyst Thye May Ting.
Thye said the stronger performance of the company's industrial chemicals segment was largely driven by higher Brent prices, making earnings susceptible to any decline in crude oil prices should geopolitical risks subside.
Beyond the chemicals business, Thye said Ancom's expansion into Brazil's soybean market has started to gain traction after its monosodium methanearsonate (MSMA) product received label approval in March 2026.
She noted that while orders have begun to materialise, sales volumes remain modest as the group's marketing campaigns and roadshows are still at an early stage.
"From its current annual sales of about 11 million litres, the group targets an additional 2.5–5.0 million litres annually from Brazil over the next three to five years," she said.
Thye also highlighted the company's potential long-term earnings contribution from the Johor Elevated Autonomous Rapid Transit (e-ART) project, in which Ancom holds a stake through the winning consortium.
The project is expected to generate recurring income through equity participation and management fees, as well as operations and maintenance services under a proposed concession period of 20 to 30 years.
"However, we do not expect the project to contribute meaningfully to earnings in the near term, given the expected 1–1.5-year negotiation period, followed by a construction timeline of at least three years," she said.
HLIB Research maintained its "Buy" call on the stock and raised its target price to RM1.32 from RM1.13 after rolling forward its valuation base year to FY27 and pegging the stock to a price-earnings multiple of 15 times.
The upgrade followed Ancom's stronger-than-expected earnings for the financial year ended May 31, 2026 (FY26).
The company posted a core net profit of RM25.9 million for the fourth quarter, up 25.3 per cent year-on-year, bringing full-year core net profit to RM86.8 million, a 35.6 per cent increase from a year earlier.
Thye said the results were in line with its expectations at 101 per cent of its full-year forecast and exceeded consensus estimates at 106 per cent.
The stronger earnings were mainly driven by higher revenue from the industrial chemicals segment, supported by stronger average selling prices following the rise in Brent crude oil prices.
This was partly offset by weaker performance in the agrichem segment due to the weaker US dollar against the ringgit.