• Maintain BUY (TP:4.15). Scientex's 1QFY24 core PATAMI of RM136.5mn met both our and market expectations, accounting for 25.5% of the full-year forecast, respectively. Revenue/PBT inched up by 3.3%/26.9% QoQ, thanks to impressive performances from both the Packaging and Property segments. Packaging revenue and operating profit (OP) surged 4.9% QoQ and 107.9% QoQ, respectively. Similarly, the Property segment saw a QoQ increase of 1.0% and 10.7% for revenue and OP, respectively. There are no changes to our FY24- 25F earnings assumption. We believe that despite the global economic slowdown and declining demand for Scientex's packaging, the company's overall performance will be offset by the consistent and enduring demand for its affordable housing. Maintain a BUY call on Scientex, with unchanged TP of RM4.15, based on SOP valuation. Overall, we like Scientex due to its: i) organic expansion and M&A activities for potential long-term growth, ii) strong position as an affordable housing developer, and iii) high commitment to sustainability and the environment in their plastic product offerings.

• Key Highlight. The management shared that Packaging segment utilisation rate stood at 53% during this quarter, thanks to higher product demand. Meanwhile, Property segment saw new launches during 1QFY24 with 930 units totalling RM275mn. We understand that take up rate for the new launches is 40% while unbilled sales stood at RM1.6bn.

• Forecast. Unchanged.

• Outlook. The Group shared that, despite facing external challenges, the Packaging segment prioritizes operational efficiency by focusing on cost reduction and waste reduction. Simultaneously, the Property segment remains optimistic about continued robust demand for its affordable properties. Overall, we expect sustainable earnings for Scientex, driven by strategic expansion, steady consumer demand, favourable contracts, and growth in the packaging segment. We also foresee resilient demand for their affordable houses, supported by upcoming launches in various states across Peninsular Malaysia, as well as efforts to acquire competitively priced land in strategic locations to address rising operational costs.

Source: BIMB Securities Research - 14 Dec 2023