KUALA LUMPUR (June 23): Chemical products maker Hextar Global Bhd's share price saw a "gap up" at the opening bell today. The stock surged as much as 25% to its intraday high of 68 sen in the morning session.

At noon break, the stock closed at 62 sen, up 7.5 sen or 13.7%. Some 15.6 million shares changed hands — the highest level in a month.

However, the sharp rise in Hextar's share price has puzzled some in the investing fraternity, wondering what could have sparked the surge in interest in the stock.

The news flow related to Hextar is that one of its executive directors, Datuk Ong Choo Meng, has raised his stakes in Rubberex Corp Bhd, a rubber glove manufacturer, and subsequently launched a mandatory general offer (MGO) at RM1.80 per share, which is a 38.4% discount over yesterday's closing.

However, it is worth noting that Hextar does not own a single share in Rubberex.

In the filing with Bursa Malaysia, Rubberex said Ong and his 90%-held Hextar Rubber Sdn Bhd have bought an additional 20.63% stake in Rubberex, raising their collective interest to 50.18% — above the 33% threshold that triggers the MGO for the remaining shares they do not own in the company.

Ong seems to have sealed a good deal buying the block of 57.25 million shares at a big discount over market price from Seng Sheng Enterprise Sdn Bhd, Datuk Seri Chiau Beng Teik and Peh Lian Hwa at RM1.80 per share or RM103.05 million in total through direct business transactions.

Notably, the purchase price is at a significant 38.4% discount from Rubberex's closing price of RM2.92 yesterday. Rubberex's share price, however, dropped seven sen to RM2.85 with about 8.58 million shares traded.

PublicInvest Research has an "outperform" call on Hextar with a target price (TP) of 91 sen.

The TP is based on 15 times price-earnings multiple on financial year 2021 (FY21) estimated earnings, amid expectations of acquisition-related activities that could provide a lift to Hextar's earnings in the second half of FY20.

For the first quarter ended March 31, 2020 (1QFY20), Hextar saw a 54% jump in net profit to RM9.45 million, from RM6.14 million a year ago, while its revenue grew 28% to RM104.57 million from RM81.9 million, mainly due to a bigger contribution from its enlarged agriculture segment and consumer products segment.

The firm said the completion of its reverse takeover of Hextar Chemical Ltd back in April 2019 resulted in enlarged revenue contribution especially from its consumer products segment.