Review

• Scientex Berhad (SCIENTX) 1HFY24 core net profit of RM268.5mn came in within expectations, accounting for 50.0% and 49.0% of ours and consensus’ full-year estimates.

• 1HFY24 PBT rose 34.2% YoY to RM373.4mn on the back of 9.5% growth in revenue. The stronger performance was mainly driven by the property division, which posted higher EBIT of 51.1% YoY to RM265.3mn. The commendable results were attributed to the consistent billing progress of existing developments and higher take up rate of approximately 60% (new launches) in 1HFY24.

• 2QFY24 vs. 2QFY23. Excluding the disposal of an investment in joint venture - MCTI Scientex Solar Sdn Bhd, which amounted to RM8.96mn, the group’s core earnings rose 31.5% YoY to RM132.0mn. The improvement in operating profit was driven by a favourable sales mix in the manufacturing segment as well as higher sales recognised for the property segment in 2QFY24.

• No dividend was declared for the quarter under review.

Impact

• No change to our earnings estimates.

Outlook

• Manufacturing. Despite weaker 1HFY24, we expect the volume for consumer and industrial packaging to gradually pick up in 2H due to the reopening of global trade, especially for stretch film products which is widely used for logistic purposes.

• Property. To recap, Scientex has proposed new land acquisitions with a total land area of 1,960 acres in 1HFY24. We believe the group will continue to expand its land bank within a target net gearing not exceeding 0.5x (FY24 net gearing stood at 0.2x). Moving forward, management targets to achieve a GDV value of RM2.1bn in FY24 as compared to RM657.0mn in 1HFY24. Hence, we reckon that the top line of the property segment will remain strong while EBIT margin is expected to sustain at around 28% for FY24.

Valuation

• We revised SCIENTX’s TP higher to RM4.30/share (from RM4.07/share) based on Sum-of-Parts (SOP) valuation and rolled forward our base year to CY25. Upgraded the stock to BUY from Hold.

Source: TA Research - 27 Mar 2024