KUALA LUMPUR (Dec 8): Ancom Nylex Bhd (KL:ANCOMNY) will see a deeper regional footprint in its tie-up with Thai chemical distributor TOPNEXT International Company Ltd, analysts said.
The proposed distribution agreements between the two will allow Ancom Nylex to leverage the extensive regional distribution network of TOPNEXT’s parent company, said Hong Leong Investment Bank on Monday in reaction to the deal.
“We view this development positively”, as the proposed distribution agreements introduce “strategic benefits” that would strengthen Ancom Nylex’s market reach in Southeast Asia, the research house said.
Ancom Nylex last week signed a non-binding term sheet to sell up to a 50% stake in a new unit to be formed under an internal restructuring to TOPNEXT in a deal worth close to RM77 million. The deal comes at a time of softer conditions in the industrial chemical sector as the market grapples with weakened demand from global economic slowdown and capacity oversupply.
TOPNEXT is a regional chemicals distributor and a unit of listed Thai Oil Public Company Ltd, one of Thailand’s major integrated refining groups. Thai Oil is a key subsidiary of Thailand's state-owned energy giant PTT Public Company Ltd.
The disposal valuation “looks fair to low”, Kenanga Investment Bank said. However, the near-term earnings impact is neutral as the stake and operations are small, the research house noted.
“Longer-term prospects should be positive from the coming together of two regional industrial chemical distributors,” Kenanga added.
Alongside the equity deal, Ancom Nylex and TOPNEXT plan to establish three distribution arrangements with Maxlive subsidiaries being the preferred distributor of TOPNEXT’s products.
TOPNEXT or its related entities will also be the preferred distributor of Maxlive’s products, including PETRONAS-linked products. A separate distribution arrangement involving Helm AG for the Indian market will be discussed post-signing of the definitive agreements.