More upside for Tex Cycle as it goes on M&A sprint

Tex Cycle Technology (M) Bhd seems likely to continue its uptrend having closed at RM1.33 on July 12. The counter retraced from the all-time high of RM1.49 in mid-Jun 2024.

It has been an impressive run for the company, which has been trading at a low of 62 sen last October. In the past year alone, the counter rose some 73% already. Texcycle could move towards resistance levels of RM1.48 and RM1.65, translating to upside potentials of 12% and 25%, respectively.

After reporting net profit of RM15.5 million, up 65% year-on-year in FY Dec 2023. It managed to keep its strong performance, posting net earnings of RM6.6 million, up 278% YoY in 1QFY24.

In terms of price/book value rating, the shares are currently trading at a multiple of 2.2x based on its book value per share of 59 sen as of end-Mar 2024.

Texclyce is raising its profile via a proposed transfer of its listing from the ACE Market to the Main Market. The corporate exercise – scheduled for completion in 1Q2025 – is expected to enhance

its investment appeal to a wider group of investors going forward.

More than that, the company has been on an aggressive expansion mode, be it organically or merger & acquisition. The company is hoping to acquire a few more companies within the waste management space before the year ends.

Its CEO Gary Dass expects to grow its profits substantially via the M&A. With all the acquisitions, the company hopes to double our current profits (financial year ended Dec 31, 2023) latest by FY2025. He said the company will enjoy full year contributions from its acquired companies starting as early as FY24.

It recently entered into a collaboration agreement with Econas Resource to Energy Sdn Bhd (ER2E) to leverage ER2E’s end-of-life waste disposal facilities, namely the secured landfill and incineration plant, to extend the range of waste management services to customers.

In June this year, Tex Cycle proposed to acquire Meridian World Sdn Bhd, which specialises in wastewater and air pollution control, for RM55 million cash.

Two months earlier, it announced a partnership with Evolusi Bersatu Sdn Bhd to invest RM100 million in Sabah’s first integrated scheduled waste management facility. Tex Cycle is said to hold a 51% in this joint venture with Evolusi.

Prospects of the company looks exciting as its new shareholders want to grow its business fast and this will augur well on its share price.