KUALA LUMPUR: HLIB Research has reduced Ancom Nylex Bhd's projected earnings for the fiscal years 2024, 2025, and 2026 (FY24/FY25/FY26) by 11 per cent, 9 per cent, and 5 per cent respectively.

This adjustment is attributed to delays in bringing Chemical T to market in the second quarter of fiscal year 2025 (2QFY25) and Chemical S in the second quarter of fiscal year 2026 (2QFY26) onwards.

"Commencement of Chemical T production faced multiple rounds of delays from earlier guidance of the end-calendar year 2023 (CY23) due to customs issues importing the intermediates from China to Malaysia.

"Coupled with the completion of machine installation by the middle of the calendar year 2024 (CY24) and some teething issues, the contribution from Chemical T will likely only set in from 2QFY25 onwards," it said.

HLIB Research stated that escalating tensions in the Middle East have also raised the challenges and expenses associated with importing goods from Israel.

"As the sole competitor of its monosodium methanearsonate (MSMA) products is an Israeli company, Ancom is seeing increasing inquiries from potential customers in order to diversify their supply source, which we believe should result in order growth for its MSMA group of products," the firm said.

HLIB Research has upheld its recommendation to 'Buy' with a lower target price of RM1.47 from RM1.65.

The firm said it favours Ancom due to its unique position as the sole large-scale producer of active ingredients for herbicides in Southeast Asia.

"The production of these active ingredients entails significant barriers to entry. Additionally, we anticipate earnings growth driven by the introduction of new active ingredients in the company's pipeline," it said.

In the same note, HLIB Research stated that it plans to offer additional analysis on the agreement between Ancom and its 34 per cent owned subsidiary, Ancom Logistics Bhd (ALB), with Greenheart Sdn Bhd (GSB), Choong Wee Keong, and How Yoon For, once the agreement is officially announced.