Review

• Scientex Berhad's (Scientex) 1QFY25 core earnings of RM128.6mn were in line with both ours and consensus’ estimates, representing 22% and 21% of the full-year forecasts, respectively.

• 1QFY25 turnover remained steady at RM1.1bn compared to the previous year. However, quarterly core earnings declined by 5.8% YoY, primarily due to weaker performance in the manufacturing segment

• Manufacturing segment. 1QFY25 segmental revenue declined by 3.8% YoY, impacted by unfavourable foreign exchange rates and weaker demand in export markets. The soft demand led to a 38.6% YoY decline in segmental EBIT to RM31.0mn, driven by lower turnover and an unfavourable product mix. Consequently, the EBIT margin fell by 2.8%-pts YoY to 5.0%.

• Property segment. The property segment partially offset the weak performance of the manufacturing segment. Segmental EBIT rose by 5.7% YoY to RM145.9mn, in line with a revenue growth of 6.0% YoY to RM483.7mn. These improvements were primarily driven by steady progress billings across Johor, Melaka, Central, and Northern regions, as well as stronger take-up rates for ongoing projects in Sungai Petani, Sungai Dua, Jenjarom, Pulai, and Bandar Jasin

• Sequentially, quarterly revenue dropped by 5.0% QoQ from the recordhigh sales of RM1.2bn in 4QFY24. Despite the decline in topline, quarterly PBT decreased marginally by 0.8% QoQ to RM175.5mn, supported by the resilience of the property segment. Notably, the property segment's EBIT margin improved by 4.6%-pts QoQ to 30.2% in 1QFY25.

• No dividend was declared for the quarter under review.

Impact

• No changes to our earnings estimates.

Outlook

• Manufacturing. Management indicated that the manufacturing segment continues to face challenges. However, Scientex remains committed to offering value-added, sustainable, and recyclable packaging solutions to its customers.

• Property. Going forward, the group remains optimistic about its property segment, driven by rising demand for affordable housing, a strong landbank of 10,277 acres, and an ongoing gross development value (GDV) of RM3.9bn.

Valuation

• Maintain Buy on SCIENTX with an unchanged TP of RM5.48/share, based on a Sum-of-Parts (SOP) valuation.

Source: TA Research - 19 Dec 2024