This article first appeared in The Edge Financial Daily, on July 4, 2016.

Tex Cycle Technology (M) Bhd (+ve)

SHARES in ACE Market-listed Tex Cycle Technology (M) Bhd (fundamental: 2.7/3, valuation: 1.1/3) triggered our momentum algorithm for the fourth time this year. The stock gained nine sen or 6.67% to close at RM1.44 last Friday with 2.12 million shares traded. This was higher than its 200-day average volume of 325,433 shares.

The company is involved in waste management for various industries, mainly electronics, engineering, automobile, oil and gas, and printing. For its first financial quarter ended March 31, 2016 (1QFY16), Tex Cycle reported a 31% increase in net profit to RM1.82 million from RM1.38 million a year ago, due to an improvement in its recycling and recovery division. Revenue for 1QFY16 grew 29.3% to RM6.81 million from RM5.27 million a year ago. As at 1QFY16, the company had a cash pile of RM8.22 million, while its total borrowings amounted to RM4.6 million.

Tex Cycle’s P2 plant is located on 8.5 acres (3.4ha) of industrial land in Telok Gong, Selangor, and fully operationalised its production in 2015. The plant is licensed to collect and process 31 types of scheduled waste as awarded by the Department of Environment.

The company’s 2016 recycling business is anticipated to be promising, and it has been reported that Tex Cycle is looking to make its maiden venture into the overseas markets next year, particularly in the Southeast Asia region.

At the current share price, Tex Cycle is trading at a trailing price-earnings ratio of 28.58 times and 3.4 times its book value. Its current share price is also close to its five-year high of RM1.46 recorded on Nov 5 last year.

Tex Cycle’s largest shareholder is Can Cycle Sdn Bhd, which controls 42.84% of the company. Can Cycle is a vehicle of Tex Cycle executive chairman Ho Siew Choong, executive directors Ho Siew Cheong and Ho Siew Weng, and managing director Periasamy Sinakalai.