Scientex (SCIENTX | 4731)

Last Price: RM4.40 | Technical Call: BUY

Company Background. Scientex is a global leader in the manufacturing of stretch film and a fully integrated producer of flexible plastic packaging. The group is also a reputable developer of affordable homes in Malaysia. It operates under two main segments: (i) packaging and (ii) property development. Internationally, Scientex is renowned for its flexible plastic packaging products, which include stretch films, base films, printed films, and multi-layered solutions for both industrial and consumer applications. Meanwhile, its property division has established a strong presence across 7 states in Peninsular Malaysia.

Prospects. (i) By focusing on innovation and customized, value-added packaging to meet the growing demand for sustainable and fully recyclable solutions, Scientex is well-positioned to seize new opportunities and expand its market base in the packaging segment, (ii) With a focus on expanding its strategic landbank, the group now owns over 10,000 acres across Peninsular Malaysia. Recent acquisitions in Johor, Selangor, and Penang set to be completed by FY25 are expected to further accelerate its near-term growth, and (iii) Solar photovoltaic (PV) systems are being installed at 10 manufacturing plants in Malaysia, generating renewable energy that will reduce operating costs and lower the carbon footprint.

Financial Performance. In FY24, Scientex posted a higher revenue of RM4.48bil (+9.8% YoY) with a PAT of RM545.2mil (+24.4% YoY). This was mainly driven by improved sales in industrial packaging, healthy construction progress and higher sales in affordable property developments, and strong demand for new project launches.

Valuation. Scientex is trading at an attractive FY25F P/E of 11.7x, lower than the Bursa Industrial Production Index's current P/E of 22.5x. In comparison, SLP Resources, a manufacturer, exporter, and distributor of plastic packaging products, polymer products, and other plastic-related goods, has a higher FY25F P/E of 14.5x.

Technical Analysis. We expect further upside for Scientex given that it took out the 4-month downtrend line a week ago. As the 20- day and 50-day EMAs have established their bullish crossover since early October, additional strength may be present in the coming sessions. A bullish bias may emerge above the RM4.30 level, with stop-loss set at RM3.98, below the 50-day EMA. Towards the upside, near-term resistance level is seen at RM5.00, followed by RM5.20.

Source: AmInvest Research - 10 Oct 2024