Company Background. Scientex is a leading global manufacturer of stretch film and fully integrated end-to-end producer of flexible plastic packaging. Additionally, it is a reputable developer of affordable homes in Malaysia. The group's primary business divisions are packaging and property development. Globally, Scientex is renowned for its flexible plastic packaging products, which include stretch films, base films, printed films and multi-layered solutions for industrial and consumer packaging. Meanwhile, its property division has established a presence across 7 states in Peninsular Malaysia while expanding into Thailand and Indonesia.

Prospects. (i) Focus on innovation and developing value-added products tailored to client needs while also meeting the demand for sustainable and fully recyclable packaging solutions. With its innovative capabilities, Scientex is primed to seize new opportunities and expand the group’s market base, (ii) In FY23, Scientex owned 7,256 acres of strategic land banks across Peninsular Malaysia. The group’s latest land acquisitions in Jenjarom (Selangor), Tebrau and Kulai (Johor Bahru) are scheduled for completion in FY24, expected to positively contribute to its near future, and (iii) Continue to launch new phases of affordable housing across its property developments to meet robust demand, leveraging on the group’s branding and strategic locations.

Financial Performance. In 1QFY24, Scientex posted a higher revenue of RM1.1bil (+7.4% YoY) with a PAT of RM137.8mil (+28.6% YoY). This was mainly due to the improved performance from the property division, which was contributed by smooth construction progress for all sites in Peninsular Malaysia, as well as higher sales and a better product mix in the packaging division.

Valuation. Scientex is trading at an attractive FY24F P/E of 11.5x, which is lower than Bursa Industrial Production Index’s 23.9x currently. As a comparison, SLP Resources, a manufacturer/exporter/distributor of plastic packaging products, polymer products and other plastic-related goods, trades at a much higher FY24F P/E of 18.3x.

Technical Analysis. Scientex may trend higher after it broke above the RM3.90 resistance and hit a new 52-week high 2 weeks ago. As the 20-day and 50-day EMAs have established a bullish crossover lately, the current upward momentum may persist in the near term. A bullish bias may emerge above the RM3.90 level, with stop-loss set at RM3.68, below the 50-day EMA. Towards the upside, near-term resistance level is seen at RM4.40, followed by RM4.70.

Source: AmInvest Research - 29 Jan 2024