This article first appeared in The Edge Malaysia Weekly on February 16, 2026 - February 22, 2026

Hextar Industries Bhd (KL:HEXIND) is raising its bets on the food and beverage (F&B) business while exiting its fertiliser distribution operation, which is currently its core income contributor.

The company is buying a 51% stake in Woodpeckers Group Sdn Bhd, master franchisee of the llaollao frozen yoghurt chain in Malaysia, for RM177.5 million. Meanwhile, it is disposing of the fertiliser operation to its sister company — Hextar Global Bhd (KL:HEXTAR) — for RM120 million. Both are cash transactions.

Woodpeckers is valued at RM348 million, representing a price-earnings ratio of 12 times.

The proposed acquisition includes an average annual profit guarantee of RM29 million each year over three years, according to Hextar Industries’ bourse filing. It guarantees a profit after taxation and minority interest (Patami) of RM27 million for FY2026 and RM29 million for FY2027.

Woodpeckers’ revenue grew from RM117.81 million in the financial year ended Dec 31, 2022 (FY2022), to RM150.64 million in FY2024, representing a compound annual growth rate of 13.08%. It achieved a Patami of RM30.3 million in FY2024.

Hextar Industries says the acquisition would be funded with internally generated funds or borrowings. The company’s gearing will rise to 0.94 times, from 0.65 times now, after its purchase of the stake in Woodpeckers, assuming 60% of the purchase consideration is funded by borrowings.

On the other hand, Hextar Industries plans to use RM100 million of the sale proceeds from the fertiliser operation for the expansion of its F&B business.

The 51% stake in Woodpeckers, which is expected to continue generating Patami of between RM27 million and RM31 million in three years, would fill the earnings vacuum left by its fertiliser business. However, Hextar Industries’ coffee beverage chain — Luckin Coffee — might continue dragging its earnings, at least in the near term, given the highly competitive operating environment, in addition to higher debts.

Only time will tell whether frozen yoghurt and coffee can feed Hextar Industries’ earnings growth sustainably.

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