Texchem Resources (TEX MK): Recovery In Sight Despite Minor Hurdles; Keep BUY
25 July 2025
Industrials | Industrial Products
Buy (Maintained)
| Target Price (Return): | MYR1.37 (86.4%) |
| Price (Market Cap): | MYR0.74 (USD20.4m) |
| ESG score: | 3.0 (out of 4) |
| Avg Daily Turnover (MYR/USD) | 0.01m/0.00m |
Analysts
Tai Yu Jie
+603 2302 8132
tai.yu.jie@rhbgroup.com
Lee Meng Horng
+603 2302 8115
lee.meng.horng@rhbgroup.com
Main Highlights
- Keep BUY, new MYR1.37 TP (SOP) from MYR1.58, 86% upside and c.6% yield. 1H25 results came in below expectations, mainly on weaker performances in the industrial and food segments. We still anticipate earnings to improve in 2H, underpinned by ongoing volume recovery, contributions from new business initiatives, and seasonally stronger demand – all of which should support operating leverage. Texchem Resources’ current 6x P/E valuation appears undemanding, and has yet to reflect its recovery prospects.
- Below expectations. 1H25 core earnings came in at MYR4.3m vs 1H24’s -MYR0.4m, meeting 26% of our full-year forecast. The shortfall was mainly on softer-than-expected performances in the industrial and food divisions. Note: We adjusted for unrealised FX losses of MYR2.2m to derive our core earnings.
- Results review. YoY, 1H25 revenue dipped 0.6% to MYR566.8m, mainly on weaker performances in the industrial segment (-6.9%) from price dumping by China, and the food division (-11.1%) amid softer global fishmeal prices. That said, 1H25 EBITDA margins expanded 1.7ppts to 8.5%, supported by stronger contributions from polymer engineering and the improving-margin restaurant division. QoQ, 2Q25 revenue rose 0.7% to MYR284.4m, driven by continued recovery in polymer engineering (+5.1%) and seasonally stronger sales in the restaurant segment (+6.8%). However, 2Q25 core profit fell 7.9% QoQ to MYR2.1m, mainly dragged by challenging operating conditions in Myanmar, which affected the food division.
- Outlook. The polymer engineering business is expected to benefit from the ongoing recovery in the hard disk drive or HDD and semiconductor industries, with continued growth from medical life science customers. Several new high-margin projects are gaining traction, and more are in the pipeline – supporting margin improvements and operating leverage, in our view. For the restaurant wing, management is looking to refresh the menu and expand into suburban locations, which tends to deliver stronger margins. Additionally, the appreciation of the MYR should help ease raw material costs. Meanwhile, the industrial segment continues to grapple with weaker demand due to price dumping from China – an external pressure that remains difficult to counter. The food division has diversified its supply chain to Thailand since FY24 to manage the impact of FX controls, and management remains hopeful on gradual easing of those restrictions.
- Forecast and ratings. We revise down our FY25F-27F earnings by 14%, 5%, and 5% after lowering our margin assumptions for the industrial and food segments. Consequently, we lower our TP to MYR1.37 (inclusive of a 0% ESG premium/discount), which implies a blended 11.2x FY25F P/E. Key risks: Weaker-than-expected sales/orders and fluctuations in chemical prices.
Share Performance (%)
| YTD | 1m | 3m | 6m | 12m | |
|---|---|---|---|---|---|
| Absolute | (2.7) | 2.1 | (10.9) | (0.7) | (12.5) |
| Relative | 3.5 | 0.4 | (13.1) | 1.4 | (7.5) |
| 52-wk Price low/high (MYR) | 0.70 – 0.99 | ||||
Forecasts and Valuation
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total turnover (MYRm) | 994 | 1,118 | 1,169 | 1,221 | 1,278 |
| Recurring net profit (MYRm) | (10) | 11 | 14 | 21 | 23 |
| Recurring net profit growth (%) | (132.6) | 28.0 | 45.9 | 8.4 | |
| Recurring P/E (x) | na | 7.69 | 6.01 | 4.12 | 3.80 |
| P/B (x) | 0.5 | 0.5 | 0.5 | 0.4 | 0.4 |
| P/CF (x) | 2.02 | 2.72 | 2.65 | 1.98 | 1.93 |
| Dividend Yield (%) | na | na | 5.9 | 8.5 | 9.3 |
| EV/EBITDA (x) | 2.79 | 2.24 | 2.18 | 1.67 | 1.28 |
| Return on average equity (%) | (5.7) | 3.8 | 7.7 | 10.6 | 10.8 |
| Net debt to equity (%) | 45.6 | 60.0 | 57.1 | 42.6 | 27.2 |
Overall ESG Score: 3.0 (out of 4)
| E Score: 3.0 (GOOD) |
| S Score: 3.0 (GOOD) |
| G Score: 3.0 (GOOD) |
| Please refer to the ESG analysis on the next page |
| Note: Small cap stocks are defined as companies with a market capitalisation of less than USD0.5bn. |
Emissions And ESG
Trend analysis: TEX will continue deploying solar-based energy in its operations to reduce emissions
| Emissions (tCO2e) | Dec-22 | Dec-23 | Dec-24 | Dec-25 |
|---|---|---|---|---|
| Scope 1 | 5,916 | – | ||
| Scope 2 | na | na | 31,899 | – |
| Scope 3 | 2,843 | – | ||
| Total emissions | na | na | 40,658 | na |
Source: Company data, RHB
Latest ESG-Related Developments
Developments with the group’s TEXa bio-plastics have contributed to a reduction in fossil energy consumption, resulting in a decrease in CO2 emissions.
TEX has entered into power purchase agreements for the procurement of electricity generated from solar photovoltaic or PV systems installed on the rooftops of its building sites.
ESG Unbundled
Overall ESG Score: 3.0 (out of 4)
Last Updated: 1 April 2025
E Score: 3.0 (GOOD)
TEX remains committed to its efforts towards environmental sustainability through the development of the TEXa biopolymer, which reduces carbon footprint and is energy saving. TEXa recorded reduction of 2.8m MJ of fossil energy vs virgin PP when compared to 1.9m MJ in 2020.
S Score: 3.0 (GOOD)
Employee and customer safety is a top priority in TEX’s operations. The four key areas of focus are: Food safety, halal, employee safety, and COVID-19 prevention. In 2021, the group achieved zero food poisoning cases and food safety issues in these operations. It will continue to monitor diligently, identify potential food safety issues, and tighten the risk controls to maintain the status quo.
G Score: 3.0 (GOOD)
TEX has applied and adopted the majority of the best practices of the Malaysian Code on Corporate Governance. Directors are skilled and from diverse backgrounds. Women are also represented, making up more than 30% of the board. It provides timely, consistent, and accurate information to shareholders.
ESG Rating History
| Date | Rating |
|---|---|
| Jul-23 | 3.2 |
| Sep-23 | 3.2 |
| Nov-23 | 3.0 |
| Jan-24 | 3.0 |
| Mar-24 | 3.0 |
| May-24 | 3.0 |
| Jul-24 | 3.0 |
| Sep-24 | 3.0 |
| Nov-24 | 3.0 |
| Jan-25 | 3.0 |
| Mar-25 | 3.0 |
| May-25 | 3.0 |
| Jul-25 | 3.0 |
Source: RHB
Financial Exhibits
Asia
Malaysia
Industrials
Texchem Resources
TEX MK
Buy
Valuation basis
SOP Valuation
Key drivers
i. Volume recovery;
ii. New business/contract wins.
Key risks
i. Escalation of raw material costs;
ii. Fluctuation of chemical prices;
iii. Competition.
Company Profile
Founded in 1973, TEX is a Malaysia-based multinational group that comprises five diverse segments: Industrial, polymer engineering, restaurant, food and venture business. These divisions encompass the trading of industrial chemicals, design and manufacturing of various polymer-related parts and components, packaging solutions, managing a restaurant chain, processing and marketing of marine products, aquaculture activities, and R&D.
Financial summary (MYR)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring EPS | (0.09) | 0.10 | 0.12 | 0.18 | 0.19 |
| DPS | 0.04 | 0.06 | 0.07 | ||
| BVPS | 1.52 | 1.54 | 1.62 | 1.73 | 1.86 |
| Return on average equity (%) | (5.7) | 3.8 | 7.7 | 10.6 | 10.8 |
Valuation metrics
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Recurring P/E (x) | na | 7.69 | 6.01 | 4.12 | 3.80 |
| P/B (x) | 0.5 | 0.5 | 0.5 | 0.4 | 0.4 |
| FCF Yield (%) | 31.3 | 17.8 | 20.4 | 33.1 | 34.5 |
| Dividend Yield (%) | 5.9 | 8.5 | 9.3 | ||
| EV/EBITDA (x) | 2.79 | 2.24 | 2.18 | 1.67 | 1.28 |
| EV/EBIT (x) | 12.22 | 5.33 | 5.10 | 3.70 | 2.84 |
Income statement (MYRm)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total turnover | 994 | 1,118 | 1,169 | 1,221 | 1,278 |
| Gross profit | 248 | 275 | 270 | 292 | 310 |
| EBITDA | 70 | 92 | 95 | 109 | 118 |
| Depreciation and amortisation | (54) | (53) | (54) | (60) | (65) |
| Operating profit | 16 | 39 | 41 | 49 | 53 |
| Net interest | (19) | (21) | (16) | (17) | (18) |
| Pre-tax profit | (2) | 15 | 24 | 32 | 35 |
| Taxation | (8) | (10) | (10) | (11) | (12) |
| Reported net profit | (11) | 7 | 14 | 21 | 23 |
| Recurring net profit | (10) | 11 | 14 | 21 | 23 |
Cash flow (MYRm)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Change in working capital | 25.3 | (13.4) | (7.4) | (3.5) | (4.6) |
| Cash flow from operations | 42.9 | 31.8 | 32.6 | 43.6 | 44.8 |
| Capex | (15.8) | (16.4) | (15.0) | (15.0) | (15.0) |
| Cash flow from investing activities | (44.2) | (44.5) | (14.0) | (15.0) | (15.0) |
| Dividends paid | 0.0 | 0.0 | (5.1) | (7.4) | (8.0) |
| Cash flow from financing activities | (42.5) | (26.9) | (42.0) | (34.4) | (36.4) |
| Cash at beginning of period | 96.0 | 89.2 | 92.1 | 112.7 | 157.4 |
| Net change in cash | (43.7) | (39.6) | (23.4) | (5.8) | (6.6) |
| Ending balance cash | 52.3 | 49.6 | 68.7 | 106.9 | 150.8 |
Balance sheet (MYRm)
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Total cash and equivalents | 89 | 92 | 113 | 157 | 208 |
| Tangible fixed assets | 312 | 315 | 306 | 291 | 271 |
| Total investments | 5 | 20 | 19 | 19 | 19 |
| Total assets | 738 | 768 | 789 | 829 | 872 |
| Short-term debt | 142 | 162 | 162 | 162 | 162 |
| Total long-term debt | 38 | 51 | 71 | 91 | 111 |
| Total liabilities | 539 | 567 | 579 | 606 | 634 |
| Total equity | 200 | 201 | 210 | 224 | 238 |
| Total liabilities & equity | 738 | 768 | 789 | 829 | 872 |
Key metrics
| Dec-23 | Dec-24 | Dec-25F | Dec-26F | Dec-27F | |
|---|---|---|---|---|---|
| Revenue growth (%) | (13.1) | 12.5 | 4.5 | 4.5 | 4.7 |
| Recurrent EPS growth (%) | (132.8) | 0.0 | 28.0 | 45.9 | 8.4 |
| Gross margin (%) | 24.9 | 24.6 | 23.1 | 23.9 | 24.3 |
| Operating EBITDA margin (%) | 7.0 | 8.2 | 8.1 | 8.9 | 9.3 |
| Net profit margin (%) | (1.1) | 0.6 | 1.2 | 1.7 | 1.8 |
| Dividend payout ratio (%) | 0.0 | 0.0 | 35.2 | 35.2 | 35.2 |
| Capex/sales (%) | 1.6 | 1.5 | 1.3 | 1.2 | 1.2 |
| Interest cover (x) | 0.85 | 1.86 | 2.60 | 2.90 | 2.90 |
Results At a Glance
Figure 1: Earnings review
| FYE Dec (MYRm) | 2Q24 | 1Q25 | 2Q25 | QoQ (%) | YoY (%) | 1H24 | 1H25 | YoY (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 294.7 | 282.4 | 284.4 | 0.7 | (3.5) | 570.4 | 566.8 | (0.6) | Weaker performances in the industrial and food segments. |
| Gross profit | 67.9 | 71.5 | 72.0 | 0.8 | 6.0 | 133.5 | 143.5 | 7.5 | |
| GP margin (%) | 23.1 | 25.3 | 25.3 | 23.4 | 25.3 | ||||
| Adjusted EBITDA | 20.6 | 24.1 | 23.9 | (0.6) | 16.0 | 38.4 | 48.0 | 24.8 | |
| Adjusted EBITDA margin (%) | 7.0 | 8.5 | 8.4 | 6.7 | 8.5 | ||||
| Depreciation | (13.0) | (12.6) | (12.4) | (2.2) | (5.1) | (26.4) | (25.0) | (5.3) | |
| Adjusted EBIT | 7.6 | 11.4 | 11.5 | 1.1 | 52.2 | 12.0 | 22.9 | 90.8 | |
| EBIT margin (%) | 2.6 | 4.0 | 4.1 | 2.1 | 4.0 | ||||
| Interest expense | (5.0) | (5.2) | (5.3) | 1.8 | 7.3 | (9.9) | (10.6) | 6.4 | |
| Share of associate | 0.6 | (0.0) | (0.1) | 225.8 | (118.4) | 0.9 | (0.1) | (114.0) | |
| EI/Others | 0.0 | (1.4) | (0.8) | (42.2) | n.m. | 0.0 | (2.2) | n.m. | |
| Reported PBT | 3.2 | 4.8 | 6.1 | 28.2 | 92.8 | 3.1 | 10.1 | 229.9 | |
| Tax | (2.4) | (3.5) | (3.7) | 6.7 | 52.7 | (3.8) | (7.2) | 91.6 | |
| Effective tax rate (%) | 77.1 | 73.4 | 61.1 | 123.5 | 71.7 | ||||
| Minority interest | 0.2 | (0.4) | (0.3) | (22.7) | (223.8) | 0.4 | (0.7) | (296.6) | |
| Net profit | 1.0 | 0.9 | 1.3 | 46.7 | 30.9 | (0.4) | 2.1 | (694.5) | |
| Core profit | 1.0 | 2.3 | 2.1 | (7.9) | 112.6 | (0.4) | 4.3 | (1,297.5) | Below expectations. |
| Core net margin (%) | 0.3 | 0.8 | 0.7 | (0.1) | 0.8 |
Figure 2: Segmental earnings
| FYE Dec (MYRm) | 2Q24 | 1Q25 | 2Q25 | QoQ (%) | YoY (%) | 1H24 | 1H25 | YoY (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | |||||||||
| Industrial | 134.7 | 120.1 | 121.0 | 0.7 | (10.2) | 258.8 | 241.0 | (6.9) | Impacted by price dumping by China. Recovery in the HDD and semiconductor industries. |
| Polymer engineering | 56.9 | 61.6 | 64.7 | 5.1 | 13.7 | 106.0 | 126.3 | 19.2 | |
| Food | 32.5 | 32.9 | 26.4 | (19.9) | (18.8) | 66.7 | 59.3 | (11.1) | |
| Restaurant | 69.6 | 66.8 | 71.3 | 6.8 | 2.4 | 136.6 | 138.1 | 1.1 | |
| Venture business | 0.7 | 0.1 | 0.6 | 384.9 | (14.8) | 1.1 | 0.7 | (38.7) | |
| Others | 0.4 | 0.9 | 0.5 | (50.7) | 24.9 | 1.2 | 1.4 | 15.9 | |
| Total | 294.7 | 282.4 | 284.4 | 0.7 | (3.5) | 570.4 | 566.8 | (0.6) | |
| Adjusted PBT | |||||||||
| Industrial | 1.4 | 1.3 | 1.0 | (25.0) | (29.3) | 3.5 | 2.3 | (33.9) | |
| Polymer engineering | 4.5 | 4.6 | 6.3 | 36.7 | 39.4 | 7.5 | 10.9 | 45.8 | |
| Food | (1.1) | 0.4 | (1.7) | (584.3) | 56.4 | (1.9) | (1.3) | (31.0) | |
| Restaurant | 0.1 | 0.2 | 1.5 | 540.7 | 1165.6 | (2.4) | 1.8 | (174.5) | |
| Venture business | (0.7) | (0.7) | (0.8) | 24.6 | 22.8 | (1.4) | (1.5) | 10.6 | |
| Others | (1.1) | (1.0) | (0.9) | (15.8) | (20.2) | (2.2) | (1.9) | (12.7) | |
| Total | 3.2 | 6.1 | 2.6 | (58.4) | (19.4) | 3.1 | 10.1 | 229.9 | |
| PBT Margin | |||||||||
| Industrial | 1.0 | 1.1 | 0.8 | 1.4 | 1.0 | ||||
| Polymer engineering | 7.9 | 7.5 | 9.7 | 7.1 | 8.6 | ||||
| Food | (3.3) | 1.1 | (6.4) | (2.9) | (2.3) | ||||
| Restaurant | 0.2 | 0.4 | 2.2 | (1.8) | 1.3 | ||||
| Venture business | (101.9) | (571.4) | (146.8) | (121.7) | (219.4) | ||||
| Others | (305.0) | (114.2) | (194.9) | (186.9) | (140.9) | ||||
| Total | 1.1 | 2.2 | 0.9 | 0.5 | 1.8 | ||||
Source: Company data, RHB
Figure 3: SOP valuation
| FY25F EPS (sen) | Ascribed P/E (x) | Value (MYR) | |
|---|---|---|---|
| Food | -0.01 | 17 | -0.13 |
| Industrial | 0.04 | 8 | 0.36 |
| Polymer engineering | 0.12 | 13 | 1.54 |
| Restaurant | 0.00 | 15 | 0.05 |
| Value per share | 1.82 | ||
| Net debt at holding company | -0.11 | ||
| 20% conglomerate discount | -0.34 | ||
| Value per share | 1.37 | ||
| ESG premium (+0%) | 0.00 | ||
| TP | 1.37 |
Source: RHB
Recommendation Chart
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-02-28 | Buy | 1.58 | 0.79 |
| 2024-05-02 | Buy | 1.44 | 0.88 |
| 2024-02-28 | Buy | 1.44 | 0.91 |
| 2023-10-27 | Buy | 1.50 | 0.84 |
| 2023-07-28 | Buy | 2.23 | 1.04 |
| 2023-05-22 | Buy | 2.77 | 1.03 |
| 2023-03-03 | Buy | 3.60 | 1.76 |
| 2023-02-24 | Buy | 3.60 | 1.71 |
| 2023-02-09 | Buy | 3.67 | 1.99 |
| 2022-11-03 | Buy | 4.40 | 2.42 |
| 2022-08-11 | Buy | 5.00 | 3.50 |
| 2022-05-11 | Not Rated | na | 2.84 |
Source: RHB, Bloomberg
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
Investment Research Disclaimers
RHB has issued this report for information purposes only. This report is intended for circulation amongst RHB and its affiliates’ clients generally or such persons as may be deemed eligible by RHB to receive this report and does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. This report is not intended, and should not under any circumstances be construed as, an offer or a solicitation of an offer to buy or sell the securities referred to herein or any related financial instruments.
This report may contain forward-looking statements which are often but not always identified by the use of words such as “believe”, “estimate”, “intend” and “expect” and statements that an event or result “may”, “will” or “might” occur or be achieved and other similar expressions. Such forward-looking statements are based on assumptions made and information currently available to RHB and are subject to known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievement to be materially different from any future results, performance or achievement, expressed or implied by such forward-looking statements. Caution should be taken with respect to such statements and recipients of this report should not place undue reliance on any such forward-looking statements. RHB expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or circumstances after the date of this publication or to reflect the occurrence of unanticipated events.
Analyst Certification
The analyst(s) who prepared this report, and their associates hereby, certify that: (1) they do not have any financial interest in the securities or other capital market products of the subject companies mentioned in this report, except for:
| Analyst | Company |
|---|---|
(2) no part of his or her compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this report.
