1.

Introduction of Hextar Global Berhad

Hextar was founded in 1985 with the goal of actively contributing to the development

and advancement of Malaysia's agriculture business, as well as the lives of those who work

in it. Hextar has been positioning itself as one of Malaysia's leading agrochemical companies.

It has been in business for 36 years and has successfully registered over 600 items in Malaysia

and around the world. The company's operations have grown to include 30 countries and 500

employees, serving as the best support system for its customers and suppliers in over 30

nations across various continents.

Over the years, the organization has evolved into a one stop solution center for the

agriculture business. The company's main activities include the manufacturing and distribution

of agrochemicals, fertilizers, and seeds, as well as industry related research and development.

Thanks to its specialized agricultural goods supply chain, Hextar Group is now the largest crop

management solutions provider in the United States, with a strong global presence. Hextar

has constantly offered new and enhanced superior agrochemical products to its customers,

from research and development to manufacture and distribution, and will continue to do so for

the foreseeable future. Furthermore, Hextar continues to manufacture consumer items in both

domestic and foreign markets while preserving the Group's primary business in agriculture.

By exporting to Argentina, Egypt, and South Africa, they continue to increase their market

presence. Their products are available in Malaysia through well-established distributors,

hypermarkets, supermarkets, and a dealer network in all major cities.

Agriculture is a significant industry in Malaysia since it provides food security and

increases income levels in rural areas. Maintaining adequate agricultural practices ensures

better utilization of agrochemical products in the areas that were overlooked in the past. This

is made possible by population figures and the shrinking amount of arable land. Due to the

adoption of modern farming techniques, Malaysia has seen a considerable increase in the

usage of agrochemicals, particularly for pesticide and fertilizer consumption. The rapid
increase of regions covered by oil palm and rubber plantations is another factor influencing

the growth of the agrochemical sector.

The production and supply of the agrochemicals market have been impacted by

COVID-19. The proper operation of numerous sectors around the world has been influenced

by the global pandemic, and this includes the market for agrochemicals. There was a

significant difference between the number of workers needed to produce agrochemicals and

those who were available due to a short-term labour shortage of migrant workers and

distribution bottlenecks, which decreased production efficiency and disrupted supply chains

across the nation. As a result, the global COVID-19 epidemic had a detrimental effect on the

agrochemicals market in Malaysia.

Year 2018 2019 2020 2021

Revenue RM 273,992,946 RM 337,277,779 RM 418,642,497 RM 464,117,699

Gross RM 54,552,107 RM 65,769,560 RM 91,028,458 RM 105,008,335

Profit
EBIT RM 41,267,073 RM 15,506,163 RM 60,026,583 RM 57,625,199

Earning RM 31,930,874 RM 2,423,041 RM 44,483,579 RM 39,209,737

after tax
Table 1: Revenue of Hextar Global Berhad (2018-2021)

From the table 1, the revenue of Hextar was increasing from year 2018 to 2021. The

group’s revenue was increase significantly from 2018 to 2019 which around 23.1%. The

significant increase was mainly due to contribution from the enlarged agriculture segment and

the incorporation of revenue from the consumer products segment, following the completion

of the Reversed Acquisition on 30 April 2019. About 94,4% of the Hextar’s revenue come from

core agriculture segment in 2019. However, Hextar’s EBIT in 2019 is much lower compare

with 2018, although the revenue increase. This was primarily caused by the RM23.99 million

one-time goodwill impairment on business combination in 2019.

 Hextar’s revenue was increasing 24.1% from 2019 to 2020. Although the government

had announced by having the movement order control (MCO), the agriculture segment has

only a little disruption. This is because agriculture-related activities are thought to be essential

services since they are a part of the food supply chain. Furthermore, the revenue increases

also due to the increase of the consumer products in year 2020. The increase revenue from

of consumer product segment was mainly due to increase in market demand for wet wipes

and tissue consumptions during the Covid-19 pandemic, as consumers are more aware on

the hygiene issue.

From 2020 to 2021, the revenue increases 10.90%. The main contribution of the

revenue is from the new acquired Specialty Chemical segment amounting RM46.2 million.

Although the main agriculture segment contributes RM402.1 million in 2021, but it only

increases 2.3% compare with 2020. This is because the shortage of supply chain and

increasing in cost in 2021. However, Hextar’s EBIT was decrease 4.00% in 2021 compare

with 2020. This is because the high administrative fee due to one-off legal and professional

fees for the various corporate exercises undertaken during the financial year 2021, including

business acquisitions and issuance of Bonus Shares.

As a conclusion, from the view of revenue, the Hextar is doing quite good before and

during the pandemic covid-19. Although Hextar is facing the challenges in the global business

environment due to the Covid-19 pandemic, Hextar continues to show resilience and growth.
 2. Capital Structure Data

Year Debt (RM) Equity (RM) Debt-to-Equity ratio

2018 64,586,895 144,362,707 0.45

2019 94,856,069 185,340,202 0.51

2020 41,567,347 201,266,742 0.21

2021 204,497,599 227,584,561 0.90

Table 2: Capital Structure of Hextar Global Berhad (2018-2021)

The debt-to-equity ratio slightly increase about 13.33% from 2018 to 2019. The was

mainly due to the increase of term loan by RM26.04 million and bills payable by RM18.79

million.

During the year of Covid-19, which is 2020, Hextar’s debt-to-equity ratio decrease

about 58.82%. This is because Hextar need to reduce the uncertainty or risk that may be

occurred and hit the business. The current ratio of the Group was recorded at 2.49 times as

at 31 December 2020 compared to 1.84 times as at 31 December 2019. The increase of

current ratio was mainly due to the decrease in bank borrowings. The decreasing in debt is to

prevent the high debt pressure in the future. Hence, to face the uncertainty in the future that

caused by Covid-19, Hextar was increase it cash flow, which from RM39,525 in 2019 to

RM39,525 in 2020.

From the 2020 to 2021, Hextar’s debt-to-equity ratio increase dramatically from 0.21

to 0.90, it increases about 328%. Non-current liabilities increased by RM357.0 million to

RM214.7 million, primarily as a result of the recognition of contingent consideration of RM58.0

million related to the profit guarantee offered by the vendors of the Specialty Chemical

business, as well as an increase in term loans of RM139.0 million to help partially finance the

purchase consideration for business acquisitions. Current liabilities went from RM86.7 million

to RM221.7 million, an increase of almost RM135.0 million or 155.9%. Term loans climbed
from RM3.2 million to RM16.8 million, trade payables increased from RM24.8 million to

RM53.1 million, and bills payable increased from RM33.0 million to RM93.0 million.

3. Financial Information

Year Total Assets Outstanding Earnings per Market Price

(RM) Share share (sen) (RM)
2018 256,983,396 714,679,564 4.47 0.4084
2019 357,321,873 785,925,466 0.31 0.3673
2020 307,054,619 1,300,744,937 3.42 0.5465
2021 664,019,594 1,310,350,473 3.01 1.5576
Table 3: Financial Information of Hextar Global Berhad (2018-2021)

Ratio/Year 2018 2019 2020 2021

Gearing Ratio

Debt-to-Equity 0.45 0.51 0.21 0.90

ratio

Equity Ratio 0.56 0.52 0.66 0.34

Debt Ratio 0.25 0.27 0.14 0.31

Market ratio

Market 291,875,133.90 288,670,423.70 710,857,108.10 2,041,001,897.00

Capitalization

Table 4: Gearing and Market Ratio of Hextar Global Berhad (2018-2021)

From 2018 to 2019 the gearing ratio of the Hextar Global Berhad overall is increase.

The company is increasing the debt and the equity from 2018 to 2019. The main reason of the

company increases the debt is mainly due to the increase in bank borrowings following the

Reverse Acquisition. Although the company is increase in the debt, but it does not lead to the

increment of the earning per share, it is because in 2019 about the company spend RM23.99

million one-time goodwill impairment on business combination. As a result, in this case the

leverage effect cannot apply, because most of the loan is for administration expense’s purpose
but not productivity purpose. The market ratio of the company decreases due to the decrease

in the stock price.

From 2019 to 2020, the gearing ratio is decreasing a lot. In 2020, Hextar reduce the

debt to deal with the Covid-19. In 2021 many uncertainties such as shortage in the supply

chain, unemployment rate increase, government restriction policy and the international

restriction. As a result, Hextar repayment RM 23,689,527 of term loans and did not do any

borrowing in 2020. Although the gearing ratio of the company decreases, and many sectors

and industries had been restricted during the movement order control (MCO), Hextar still can

outperform. This is because Hextar is the essential industry that supply the chemical products

to farmers. Other than that, the company the issuance of 714,679,564 new ordinary shares in

the company at an issue price of RM0.81 per share the capital is for the acquisition purpose.

Hence, it pushes up the market capitalization.

From year 2020 to 2021, the company debt increases about 121.43% which in very

large percentage. Based on the The Edge Markets, Hextar Group had financing about RM105

million to acquire Nobel Synthetic Polymer Sdn Bhd and Nobel Scientific Sdn Bhd, collectively

known as the Nobel Group. These two companies are the manufactures and supplies coating,

chemical derivatives, and related products. On 23rd September 2021, Hextar Global’s all

shareholders approved of its proposed acquisition of the Nobel Group, and they believe it will

contribute the group in positive earnings in the following years. The acquisition of the company

is one of the productivity activities because acquisition is the one of the ways to expand

Hextar’s market. Hence it also causes the stock price of the Hextar increase greatly in 2021.

In here the gearing effect can be seen since the revenue and the earning per share is increase.
 4. Forecasted financial statement

The forecasted statement of profit or loss below is from 2022 to 2026. The growth sales

we are using are the average growth rate from 2018 to 2021 as shown in the appendix. For

the other incomes, we will use the average 4 years' income because this income is generated

from other than production lines such as rental income and dividend income, so it is difficult to

predict. Besides that, selling and marketing expenses, administrative expenses, other

expenses, net impairment losses on financial assets, and share of profit of a joint venture are

calculated using the average percentage of the total revenue from 2018 to 2021. The finance

cost or also known as interest expense, we are assuming the cost will be 10% of the debt,

may refer to the table of debt above.

The forecasted statement of financial position in below is from 2022 to 2026. All the

items in the current assets are calculate using the average percentage of total revenue from

2018 to 2021. The plant, equipment and property also using the average percentage while the

other non-current assets such as the intangible assets and right- of-use assets we assume

the same above, since the increasing in production line only need to increase the equipment

and factories. For the ending capital, we add the beginning capital and the retained earnings

in that year. The account payable and non-trade and non-bank liabilities is using the average

percentage. The debt calculation can refer to the debt table. All the percentage calculation is

in appendix.
 FORECASTED STATEMENTS OF PROFIT OR LOSS FROM 2022 TO 2026
Average Percentage/
Year Amount (%/RM) 2022 2023 2024 2025 2026

Revenue 19.36 553,970,886 661,219,649 789,231,773 942,027,044 1,124,403,480

(-)COGS 79.06 437,969,382 522,760,254 623,966,640 744,766,581 888,953,391

Gross profit 116,001,503 138,459,394 165,265,133 197,260,463 235,450,089

Other income 4,051,972.25 4,051,972 4,051,972 4,051,972 4,051,972 4,051,972

Selling and marketing
expenses 2.56 14,181,655 16,927,223 20,204,333 24,115,892 28,784,729

Administrative expenses 5.43 30,080,619 35,904,227 42,855,285 51,152,069 61,055,109

Other expense 2.55 14,126,258 16,861,101 20,125,410 24,021,690 28,672,289

Finance costs 15,841,467 21,822,068 25,990,328 30,551,042 35,948,916

Net impairment losses on
financial assets 0.12 664,765 793,464 947,078 1,130,432 1,349,284
Share of profit of a
joint venture, net of tax 0.12 664,765 793,464 947,078 1,130,432 1,349,284

Profit before taxation 45,823,477 50,996,747 60,141,749 71,471,743 85,041,019

Based on LHDN, 24% for
Income tax expense Corporate 10,997,635 12,239,219 14,434,020 17,153,218 20,409,844

Profit after taxation 34,825,843 38,757,528 45,707,729 54,318,525 64,631,174

(-) Dividend 61.80 21,522,371 23,952,152 28,247,377 33,568,848 39,942,066

Retained Earning 13,303,472 14,805,376 17,460,352 20,749,676 24,689,109

 FORECASTED STATEMENTS OF FINANCIAL POSITION FROM 2022 TO 2026
Yaer Avearge percentage (%) 2022 2023 2024 2025 2026
Revenue 553,970,886 661,219,649 789,231,773 942,027,044 1,124,403,480
COGS 437,969,382 522,760,254 623,966,640 744,766,581 888,953,391

Asset
Current Assets
Cash and cash equvalents 7.94 43,985,288 52,500,840 62,665,003 74,796,947 89,277,636
Account Receivable 36.16 200,315,872 239,097,025 285,386,209 340,636,979 406,584,298
Inventories 25.59 141,761,150 169,206,108 201,964,411 241,064,721 287,734,851
Other current asset 4.05 22,435,821 26,779,396 31,963,887 38,152,095 45,538,341
Total current Assets 408,498,131 487,583,369 581,979,509 694,650,742 829,135,126

Non-current Assets
Plant, property, equipment 12.7 82,160,533 83,974,895 100,232,435 119,637,435 142,799,242
Other Non-current Assets 192,210,411 192,210,411 192,210,411 192,210,411 192,210,411
TOTAL ASSETS 682,869,075 763,768,676 874,422,356 1,006,498,588 1,164,144,779

Equity
Beginning Capital 227,584,561 240,888,033 255,233,499 272,693,852 293,443,528
(+)Retained Earning 13,303,472 14,805,376 17,460,352 20,749,676 24,689,109
Ending Capital 240,888,033 255,693,409 272,693,852 293,443,528 318,132,637
Liabilities
Debt 158,414,671 196,398,616 233,912,952 274,959,378 323,540,240
Account Payable 12.93 56,629,441 67,592,901 80,678,887 96,298,319 114,941,673
Non-Trade and Non-Bank
Liabilities 27.31 151,289,449 180,579,086 215,539,197 257,267,586 307,074,590
Total Liabities 366,333,561 444,570,603 530,131,036 628,525,283 745,556,504
TOTAL EQUITY AND
LIABILITIES 607,221,594 700,264,012 802,824,887 921,968,811 1,063,689,140
New Financing 75,647,481 63,504,664 71,597,468 84,529,777 100,455,639
 Debt Table From 2022 to 2026
Year 2021 2022 2023 2024 2025 2026
Beginning Debt 158,414,671 218,220,685 259,903,280 305,510,420 359,489,155
(-)Interest Payment (10%) 15,841,467 21,822,068 25,990,328 30,551,042 35,948,916
Balance of debt 142,573,204 196,398,616 233,912,952 274,959,378 323,540,240
(+) New Financing 75,647,481 63,504,664 71,597,468 84,529,777 100,455,639
Ending Debt 158,414,671 218,220,685 259,903,280 305,510,420 359,489,155 423,995,879
Appendix:

STATEMENTS OF PROFIT OR LOSS FROM 2018 TO 2021

Year 2018 2019 2020 2021
Revenue 273,992,946 337,277,779 418,642,497 464,117,699
(-)COGS 219,440,839 -271,508,219 -327,614,039 -359,109,364
Gross profit 54,552,107 65,769,560 91,028,458 105,008,335
Other income 5,836,157 4,132,028 3,196,820 3,042,884
Selling and marketing expenses -5,076,963 -8,825,599 -9,582,277 -16,144,991
Administrative expenses -13,023,866 -19,365,516 -19,989,728 -29,869,771
Other expense -1,319,651 -25,872,122 -4,851,012 -4,093,881
Finance costs -3,115,757 -4,324,497 -3,338,479 -4,059,704
Net impairment losses on financial assets -755,208 -352,702 -727,577
Share of profit of a joint venture, net of tax 299,289 423,020 577,024 410,200
Profit before taxation 38,151,316 11,181,666 56,688,104 53,565,495
Income tax expense -6,220,442 -8,758,625 -12,204,525 -14,355,758
Profit after taxation 31,930,874 2,423,041 44,483,579 39,209,737
Dividend 29,379,343 32,640,407 19,696,309
Retained Earning 31,930,874 -26,956,302 11,843,172 19,513,428
Year 2018 2019 2020 2021 Average
Revenue Growth Rate 23.10 24.12 10.86 19.36
(-)COGS Percentage to Revenue 80.09 80.50 78.26 77.37 79.06
Gross profit
Other income Average in Four Years 4051972.25
Selling and marketing expenses Percentage to Revenue 1.85 2.62 2.29 3.48 2.56
Administrative expenses Percentage to Revenue 4.75 5.74 4.77 6.44 5.43
Other expense Percentage to Revenue 0.48 7.67 1.16 0.88 2.55
Finance costs
Net impairment losses on financial assets Percentage to Revenue 0.00 0.22 0.08 0.16 0.12
Share of profit of a joint venture, net of tax Percentage to Revenue 0.11 0.13 0.14 0.09 0.12
Profit before taxation
Income tax expense
Profit after taxation
Dividend Percentage to EAT 73.38 50.23 61.80
Retained Earning
 FORECASTED STATEMENTS OF FINANCIAL POSITION FROM 2022 TO 2026
Yaer 2018 2019 2020 2021
Revenue 273,992,946 337,277,779 418,642,497 464,117,699
COGS 219,440,839 271,508,219 327,614,039 359,109,364

Asset
Current Assets
Cash and cash equvalents 13,921,666.00 29,550,577.00 17,324,535.00 63,953,055.00
Account Receivable 117,052,685.00 130,796,125.00 111,194,739.00 169,742,974.00
Inventories 72,979,315.00 79,190,179.00 81,117,669.00 152,509,384.00
Other current asset 5,539,854.00 33,616,735.00 6,168,932.00 12,701,789.00
Total current Assets 209,493,520.00 273,153,616.00 215,805,875.00 398,907,202.00

Non-current Assets
Plant, property, equipment 32,048,190.00 45,542,372.00 41,393,295.00 72,901,981.00
Other Non-current Assets 15,441,686.00 38,625,885.00 49,855,449.00 192,210,411.00
TOTAL ASSETS 256,983,396.00 357,321,873.00 307,054,619.00 664,019,594.00

Equity 144,362,707.00 185,340,202.00 201,266,742.00 227,584,561.00

Liabilities
Debt 36,516,415.00 36,516,415.00 12,826,888.00 158,414,671.00
Account Payable 25,685,185.00 34,213,645.00 31,962,094.00 63,453,195.00
Non-Trade and Non-Bank Liabilities 50,419,089.00 101,251,611.00 60,998,895.00 214,567,167.00
Total Liabities 112,620,689.00 171,981,671.00 105,787,877.00 436,435,033.00
TOTAL EQUITY AND LIABILITIES 256,983,396.00 357,321,873.00 307,054,619.00 664,019,594.00
Asset 2018 2019 2020 2021 Average
Current Assets
Cash and cash equvalents Percentage to Revenue 5.08 8.76 4.14 13.78 7.94
Account Receivable Percentage to Revenue 42.72 38.78 26.56 36.57 36.16
Inventories Percentage to Revenue 26.64 23.48 19.38 32.86 25.59
Other current asset Percentage to Revenue 2.02 9.97 1.47 2.74 4.05
Total current Assets

Non-current Assets
Plant, property, equipment Percentage to Revenue 11.70 13.50 9.89 15.71 12.70
Other Non-current Assets
TOTAL ASSETS

Equity
Liabilities
Debt
Account Payable Percentage to COGS 11.70 12.60 9.76 17.67 12.93
Non-Trade and Non-Bank Liabilities Percentage to Revenue 18.40 30.02 14.57 46.23 27.31
Total Liabities
TOTAL EQUITY AND LIABILITIES