TMK Chemical resolute in meeting targets

TMK Chemical Bhd remains optimistic about its business prospects as its share price rebounds by nearly 30% over the past six months.

Acknowledging the tough transition and shareholder concerns, deputy chairman Leong Chao Seong and managing director Wong Kin Wah emphasises that the transition to a public-listed entity has made the company more transparent, structured and focused.

Leong notes that this shift has positioned the company to better align with investor expectations, stating, “We are now thinking in line with our investors.”

Answering investors’ concerns

TMK Chemical’s share price faced disruptions earlier this year due to trade and tariff uncertainties.

This led customers and investors to adopt a cautious stance while awaiting further clarity on the situation.

Additionally, managing director Wong highlights that the underperformance of other chemical groups listed on Bursa Malaysia further contributed to investor apprehension, impacting TMK Chemical’s share price.

He stresses the importance of differentiating TMK Chemical from petrochemical entities.

The company’s share price also declined in line with the broader chemical sector’s performance.

“The fire incident in Putra Heights in April also affected the operations of many factories from the Klang Valley to Penang, and indirectly affected our results.

“We have engaged with our shareholders for them to better understand our business and to differentiate ourselves from companies in the petrochemical segment that may be facing a more challenging environment,” he says.

Leong reiterates that TMK Chemical is standing firm in its policy of targeting a dividend payout ratio of 30% to 50% of its annual profit after tax, which he stresses would provide flexibility to support expansion, such as plant upgrades and acquisitions, while ensuring consistent returns to investors.

He observes that the group met 20% of its financial targets in the first quarter (1Q25) of financial year ending Dec 31, 2025 (FY25), 21% in 2Q25, and 26% in 3Q25, while expressing optimism that the improvement can continue in 4Q25, or at least match the previous quarter.

The group has declared a dividend of 2.1 sen per share so far in FY25.

Investments and future acquisitions

Wong reveals that the company has achieved full capacity at its Banting Plant 1, which began operating in May 2024 to manufacture 216,000 of sodium hydroxide, with Banting Plant 2 scheduled to come online by 4Q26.

“With Plant 1, we managed to overcome a bottleneck in December last year and as a result, increased its capacity by 10%,” he says.

The group allocated RM90.2mil from the initial public offering (IPO) proceeds for the expansion of Plant 1, which represents 23.4% of the total RM385mil raised through the issuance of 220 million new shares at RM1.75 each.

Although the group invested RM280mil in Plant 1, Wong says Plant 2 will only “cost” RM120mil, despite the newer plant slated to double TMK Chemical’s manufacturing capacity to 432,000 tonnes.

“The investment in Plant 2 is less than half of Plant 1. It is also likely that we will only need to hire 10 more personnel on top of the 100 we already have in the first plant.

“All in all, this is a sweet spot for us in that we are not only doubling capacity, but also making our investments more efficient,” Leong chips in.

Wong adds that the company is in discussions for an acquisition, for which it has allocated RM99mil from part of the IPO proceeds last year.

He tells StarBiz 7 that the potential acquisition is related to the group’s own core business of total chemical management and manufacturing services.

He assures investors that TMK Chemical remains firmly rooted in businesses that it is familiar with.

Leong says the company is also looking to acquire a third Singapore plant in 1Q26.

Wong notes that the glass and oleochemical segments have underperformed so far this year.

“On the other hand, we see the electrical and electronic sector, in particular the semiconductor sub-segment, picking up momentum.

“The utilities sector is also growing consistently, as water works consumption increases y-o-y.

“It will continue to look up, particularly as data centre plays become more prominent,” he says.

Big picture

Looking at a bigger scale, Leong points out that TMK Chemical’s growth is strongly linked to Malaysia’s Industrial Production Index, and riding on the country’s 4.3% average annual expansion from 2021 to 2024.

“From a geopolitical perspective, we are also optimistic about the China+1 strategy used by many companies, because we believe this will only be positive as a whole for South-East Asia, and for us.

“Moreover, with the Madani government attracting foreign investors to set up plants in Malaysia, we are well-positioned to continue benefitting as half of the investors will use our chemicals,” he says.