Next Growth Engines of Luxchem (Part 2 of 2)

Next Emerging Market-ASEAN, Vietnam, Particularly!

Luxchem has established their business in Vietnam since few years back. Their business has since grown from strength to strength and start to gain traction since year of 2015 followed by the incorporation and investment in Vietnam subsidiary. In the same year, Luxchem had successfully obtained an Investment certificate which allows Luxchem to commence business in Vietnam. 

Quoted from AR 2015

Why this License is Important for Luxchem?

With this license, Luxchem is able to sell their product to their customer in Vietnam directly and without "Middle Man". This is the win win situation for both seller and buyer, as Seller (Luxchem) will enjoy higher profit margin and sell the products at more competitive price and Buyer is able to procure the goods at lower price. 

From AR 2016, turnover in Vietnam had lifted 23% higher compared to FY2015. 

Again, why Vietnam?

As you can see from one of the comprehensive report about Vietnam Chemical Industry Outlook posted during year of 2016. Chemical Industry had achieved the high growth rate of 19.25% during the year from 2010 to 2014 and it is expected to grow substantially. 

The report further described,

"Chemicals ranked 11th among the top imported items in the country with a turnover of 1.94 billion US dollars and has just started to develop and met only 15-20% of demand meanwhile consumption in many areas every year are so high. Gaps in the market are also canvassed in detail, breaking the market into key components."

Quoted from http://www.businesswire.com/news/home/20160622006231/en/Vietnam-Chemicals-Report-2015-2016---Research-Markets

With such a demanding Vietnam market and followed by acquisition of Transform Master Sdn Bhd,  it has no doubt Luxchem could be able to continue gaining the traction and heading to their 10th consecutive growth financial year (expect for FY2012, slight decrease of 2 mil in turnover)

The price of Luxchem was traded at RM 1.56 with the PE of 8.5, DY of 4.3%. Margin of safety is relatively high for a growing business.

Comparing to its close peer, Sxxcxxx, with the price of RM2.28, PE of 20.76, DY of 2.6%. 

What say you?

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