Kenanga Research maintains Underperform, raises target price for Scientex

Scientex was among the top gainers as investors were positive about its purchase of Mondi Ipoh Sdn Bhd (MISB) for RM58mil cash to expand its consumer packaging division.

KUALA LUMPUR: Kenanga Research maintained its Underperform call on Scientex Bhd but raised its target price for the counter to RM7.80 from RM7.40 on increased earnings. 

It said on Friday that the target price was based on its sum-of-parts FY19 valuations with an unchanged price earnings ratio (PER) of 10.0x for the property segment and an unchanged 14.0x applied PER for the manufacturing segment. 

“Results have been weak in previous two quarters, missing expectations, while earnings improvements this quarter were mostly driven by the property sector of which we are not overly bullish on. 

“As such, we are comfortable with our Underperform call as our in-house property analyst has reservations on the sustainability of the strong margins and maintains a neutral outlook on the sector in light of macro uncertainties and margin pressures,” it said in a note.

The research house is expecting property launches of between RM800mil to RM850mil in FY19-20, as it increases its property Ebit margin slightly to 35%, from 32% previously, on the segment’s strong margin improvements this quarter, and maintained manufacturing sector utilisation rates of 65-70% in FY19-20 on capacity of 450k MT per annum.

All in, it increased FY19 core net profit estimates by 6% to RM309mil, and introduced FY20 CNP of RM333mil, with dividend yields of between 2.8% and 3.0% in FY19-FY20.