Luxchem, Another Gem In The Making

The principal activities of Luxchem are manufacturing and trading of unsaturated polyester resin and related products, import and distribution of chemical and pertochemical products. It is principally an investment holding company with two subsidiaries - Luxchem Polymer Industries Sdn Bhd and Luxchem Trading Sdn Bhd. Three of Luxchem’s subsidiaries are ISO9001:2000 certified. This provides quality assurance to Luxchem’s customers.



The industrial chemical supplier and unsaturated polyester resin (UPR) manufacturer currently it has seven distribution and marketing centers, of which six are in Peninsular Malaysia and one in Singapore. Luxchem supplies over 400 types of industrial chemicals (basic industrial chemicals, plastic in primary forms and synthetic rubber including UPR) to some 800 customers from industries that use rubber and plastics in the production process. The large client base limits Luxchem’s customer & industry specific risks and provides Luxchem strong bargaining power. Luxchem’s customers are spread out into 10 different manufacturing industries. The diversity enables Luxchem to mitigate risks arising from a particular industry while still exposing itself to any of the industries’ growth.

The Group produces Malaysia's most comprehensive portfolio of unsaturated polyester resins under the brand name POLYMAL. Luxchem is a convenient one stop supply centre that supplies 400 types of chemicals and 100 different grades and types of UPR. Luxchem is currently focusing on its UPR segment. It has a wide number of applications and is a potential growth area. Moreover, this segment has a high barrier to entry due to the high capital investment and level of technology required.Today, LCB exports to Thailand, Singapore, Indonesia, Vietnam, Philippines, China, Australia and the Middle East.

SUMMARY OF KEY FINANCIAL INFORMATION

31/12/2009

		INDIVIDUAL PERIOD		CUMULATIVE PERIOD
		CURRENT YEAR QUARTER	PRECEDING YEAR CORRESPONDING QUARTER	CURRENT YEAR TO DATE	PRECEDING YEAR CORRESPONDING PERIOD
		31/12/2009	31/12/2008	31/12/2009	31/12/2008
		$'000	$'000	$'000	$'000
1	Revenue	83,660	73,000	305,308	331,615
2	Profit/(loss) before tax	6,929	3,490	25,521	23,580
3	Profit/(loss) for the period	5,101	2,732	18,971	17,973
4	Profit/(loss) attributable to ordinary equity holders of the parent	5,101	2,732	18,971	17,973
5	Basic earnings/(loss) per share (Subunit)	3.90	3.30	14.60	15.00
6	Proposed/Declared dividend per share (Subunit)	5.00	5.00	7.00	5.00
		AS AT END OF CURRENT QUARTER		AS AT PRECEDING FINANCIAL YEAR END
7	Net assets per share attributable to ordinary equity holders of the parent ($$)	0.7900		0.7100

The company registered excellent results for 2009 with a net profit of RM18.9m or a net EPS of 14.6 sen. Luxchem has also declared a total of 7 sen dividend for 2009. At RM1.03, the stock trades at a ridiculous 7x 2009. It pays very good dividends, what more you want.



NOTE: The above opinion is not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

SGX Cracks The Whip

One may think that there are plenty of shenanigans in Malaysia, but they are just as rampant even in Singapore stock market. There are many small penny stocks that are being played like there is no tomorrow. Controlling share blocks change hands frequently causing many to speculate on "new order of business" or causes investors to bet on personalities, or mavericks as we like to all them. There are also problems with some foreign listings. The new rules by SGX are necessary.

One of the more important development would be the need to disclose on shares being collateralised by the controlling shareholder - we all know what that will mean. It may also hit some Malaysian company owners who have pledged their shares in Singapore in exchange for lines of credit - they certainly will not want that information to be in the public. Can you guess which Malaysian companies will be affected? I know a few but to put them up would be unethical, so do your own research and be careful. In fact some may already be "affected".

Business Times Singapore: Errant directors of listed companies may come under greater scrutiny from the Singapore Exchange (SGX), which could object to their appointment and rap them publicly.

Proposed new rules also have more safeguards against poor governance for listings with large overseas operations. They demand more disclosure over possible changes in control of companies due to share pledges for loans. In a consultation paper issued yesterday, SGX said that when companies become the subject of an investigation of “irregularities or other wrongdoing”, they may require approval to appoint directors, chief executives (CEOs) and chief financial officers (CFOs).

Controlling shareholders under investigation may be prevented from installing a proxy after being booted out from the company.

SGX also seeks to cement its right to censure publicly or object to the appointment of key executive officers or directors if they have breached regulations or have “refused to cooperate with the regulators”.

The moves will make directors and executives of public listed companies more conscious of their duties, said Lee Suet Fern, managing partner of Stamford Law Corporation. “There was otherwise a lacuna where errant directors and executives who had caused breaches of our rules but had not actually committed a crime, could continue unscathed.”

An outgoing CFO must also confirm with SGX that there are no irregularities or material differences in opinion with the board or management. This could act as a whistle-blowing mechanism. The regulator also wants companies to ensure that an independent director (ID) is sitting on the board at all times. In 2006, now-delisted retailer Robinson saw all its IDs quit after a board tussle.

For foreign listings, or companies with “offshore principal subsidiaries”, at least one ID who is staying in Singapore should be on the board. One market watcher cautioned that this might put too much burden on IDs and deter some from sitting on the board. If foreign listings are being audited by overseas auditors, new rules may require such companies to have a joint sign-off with a Singapore accounting firm for the accounts, as mentioned by then-CEO Hsieh Fu Hua in August.

Hsieh added then that controlling shareholders may soon need to disclosure their share pledges to the public, an issue that had been magnified by the recent slew of S-Chips’ CEOs losing their controlling stake to debtors after they defaulted on loans.

Under the proposal, shareholders must publicise their pledged shares when the total stake is at least 30 per cent, when an enforcement may cause a breach of loan covenants by the company, or when the controlling shareholder is the single-largest one and has pledged at least half of his stake.

“It becomes a company matter and not a personal matter in such cases and I believe the shareholders’ right to know far outweigh the privacy concerns,” said Mak Yuen Teen, co-director of the Corporate Governance and Financial Reporting Centre at NUS.

In addition, SGX proposes to ban the transfer of shares in a company that is under trading suspension. It wants controlling shareholders and their associates to have their shares custodised with the Central Depository or a depository agent who has made arrangements with SGX to restrict transfers of shares during suspension.

Newly listed companies have also been asked by SGX to consider engaging a governance adviser for two years after their initial public offering. In some instances, SGX may ask the company to appoint an adviser. The consultation paper will be available for feedback until Jan 15.

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In a bid to increase market transparency, the Singapore Exchange (SGX) has said that it is making it compulsory for brokers to mark all short-sell orders. A short-sell order is defined as any sell order where the seller does not own the quantity of shares sold at the time of placing the order. SGX said it will institute this policy of marking short-sell orders in the first half of 2010 in consultation with the Monetary Authority of Singapore (MAS). In addition, statistics of aggregate short-selling activity for each individual security will be published daily.


p/s photos: Luna Maya