RHB Investment Bank Bhd (RHB Research) has maintained its BUY call on Texchem Resources Bhd with a target price of RM1.37, implying an 84% upside potential and about 8% FY26 yield, citing expansion initiatives in the food division and sector tailwinds in the hard disk drive (HDD) market.
The research house noted that management had clarified the use of proceeds from the recently announced disposal, with funds to be channelled into the food business. Texchem is disposing of a 34% stake in its subsidiary Sea Master Food for RM14.9 million in cash. Of this, RM10 million will be paid by its other subsidiary, Wilpack Food Services, directly to Texchem, while RM4.6 million will go towards debt repayment.
Following the transaction, which is expected to be completed by the fourth quarter of 2025, Texchem will retain a 66% stake in Sea Master Food. The division had faced challenges, posting RM59 million revenue in the first half of 2025, down 11% year-on-year, alongside a pre-tax loss of RM1.3 million. Political instability and foreign exchange controls in Myanmar weighed on performance. Proceeds from the disposal are intended to fund a new food processing project in Thailand, potentially through joint ventures with local operators, with the launch targeted by end-FY25.
RHB Research also highlighted that the tightening supply in the HDD market should support Texchem’s polymer engineering division, which contributed 21% of sales and 99% of pre-tax profit in FY24. Demand for nearline HDDs has surged on the back of AI-related storage needs and limited production capacity, providing an opportunity for Texchem as a key supplier of plastic packaging to HDD makers. The division is also seeing prospects in the semiconductor sector, as well as medical and life sciences applications, which could further enhance profitability.
In other segments, Texchem is planning menu revamps and suburban expansion in its restaurant business to improve margins, while a stronger ringgit may ease raw material costs. Its industrial division, however, remains pressured by price competition from China, although management is focusing on operational efficiency to weather the downturn.
RHB Research made no changes to its FY25–27 earnings forecasts but adjusted dividend assumptions, excluding special payouts in line with management’s updated guidance on the disposal proceeds. The research house said the valuation remains attractive at a blended 7.7 times FY26 forward P/E, supported by Texchem’s diversified portfolio and ongoing expansion plans.
As 10.56 am, the stock price was last done at RM0.745.
