TMK Chemical acquisition triggers a target price trim

By the Editorial Team · Tuesday, September 22, 2026

TA Securities has lowered its target price for TMK Chemical Bhd to RM3.44 due to a larger-than-expected share dilution following TMK's RM940 million acquisition of Chemical Company of Malaysia Bhd. The deal will increase TMK’s net gearing from a net cash position to 0.22 times, although the brokerage maintains a “buy” rating based on a reasonable valuation and growth outlook.

TA Securities has reduced its target price for TMK Chemical Bhd to RM3.44 from RM3.48 following a higher-than-anticipated share dilution linked to the company's acquisition of Chemical Company of Malaysia Bhd (CCM) from Batu Kawan Bhd. The brokerage had initially projected the issuance of 250 million new shares but adjusted its estimate to 262.5 million shares after the acquisition terms were finalized.

The acquisition, valued at RM940 million, involves a combination of RM438.5 million in cash and the issuance of 262.5 million new TMK shares priced at RM1.908 each. The cash component will be partially funded by RM99.1 million from proceeds of an earmarked initial public offering, with the remaining RM339.4 million expected to be financed through bank borrowings and/or internally generated funds.

Upon completion, Batu Kawan will directly hold a 20.8% stake in TMK Chemical. TA Securities noted that the purchase price is broadly consistent with previously indicated valuations, with adjustments mainly reflecting CCM’s net cash position.

Financially, the acquisition implies a price-earnings ratio of 12.9 times based on CCM’s adjusted profit after tax and minority interests of RM72.7 million for the financial year ended September 30, 2025. The price-to-book ratio stands at 1.4 times, calculated from CCM’s FY25 equity attributable to owners of RM673.4 million. With CCM’s net margin at 10.9% and return on equity at 11.4% for FY25, the brokerage considers the valuation reasonable.

However, the deal is expected to impact TMK's balance sheet, shifting the company from a net cash position to net debt. As of June 30, 2026, TMK held net cash of RM58.5 million, corresponding to a net gearing ratio of negative 0.07 times. TA Securities projects that following the acquisition and assuming the full RM339.4 million cash consideration is bank-financed, TMK’s net gearing will increase to 0.22 times.

Despite the revisions, the brokerage retained a “buy” recommendation for TMK Chemical, applying an 18 times earnings per share multiple for the financial year ending December 31, 2027.

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