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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Next Growth Engines of Luxchem (Part 1 of 2)

Next Growth Engines of LUXCHEM (Part 1)

LUXCHEM BHD had delivered a much improved earnings performance in 1QFY17, due to improved contribution from both manufacturing and trading activities  (+94.4% YoY). 
EPS had improved significantly from  2.64 per share to  4.94 per cent. Share price is stood at RM 1.56 (28th of April 2017) with the PE of only 8.69. This improvement of YoY result has encouraged me to share the insight of Luxchem's business development, since Luxchem is an extremely low profile company with huge potential to growth.


The first main growth engine of Luxchem- Acquisition of Transform Master

Source: Luxchem 1QFY17 Quarterly Financial Report, Page 9 of 13

Follow by Luxchem's acquisition of Transform Master Sdn Bhd (TMSB) since April of 2016, TMSB has contributed to Luxchem's revenue and profit positively.


Who is Transform Master Sdn Bhd?  (http://transformmaster.com.my/v1/)
TMSB is a chemical manufacturing plant who mainly produce rubber latex chemical dispersion, latex processing chemicals, latex surfactant, dispersasant & specialty chemicals for latex industry.

Their plant is strategically located at Lumut Port, which is nearby to well known Malaysia oil and gas giant, SapuraEnergy Fabrication yard.

What is the reason behind for Luxchem to acquire Transform Master?

Which I believe Transform Master's main customer, YTY Group is the main driver behind. YTY is the medical glove manufacturer located in Perak and they are in aggressive expansion mode.

"Back to year of 2010, they have some of the most modern and automated lines in the industry. Our current production capacity exceeds 8.2 billion pieces of gloves a year"

YTY First GLove Factory Located at Lekir Perak

"By year 2012, our production capacity would have increased to 10.5 billion pieces a year"  (Quoted from YTY Group Website)

The capacity towards 10.5 billion pieces of medical gloves was underpinned by their second factory which is located at Lumut Port, under the name of Green Prospect Sdn Bhd.

Now, YTY Group has further expand their capacity aggressively through their third plant located at Lumut Port too, just next to SapuraEnergy Fabrication yard. There is a huge parcel of land which allows YTY group DOUBLE UP their capacity easily.

 I believe their third plant has started production but yet to fully operated. As you can see from photo, the plant is equipped with workers dormitories too. With the uninterrupted water supply in Perak and strategic location beside the Lumut Port, YTY Group is in the right direction to further expand their business globally.

*REMARK-OUT OF DATE Photos Taken from Google Map back to year of 2013 and 2015

*REMARK-OUT OF DATE Photos Taken from Google Map back to year of 2013 and 2015

As such, I believe Transform Master Sdn Bhd,  as the sole supplier of Latex Processing Related Chemicals will continue benefited from the aggressive and stable development of YTY group, locally and regionally.