KUALA LUMPUR: Scientex Bhd
’s FY17 core earnings of RM255mil came within Kenanga Investment Bank Research’s forecast as it maintained its Market Perform and target price of RM8.50 for the consumer packaging and property company.
The research house said on Wednesday the core earnings were within its (96%) but slightly below consensus (93%) FY17E estimates.
“We believe the deviation from consensus estimate was likely due to an overly bullish top-line (86%) likely on expectations of stronger contributions from the biaxially oriented polypropylene film (BOPP) plant (opened in September 2016), and expansions at its Rawang and Ipoh plants,” it said.
Kenanga Research expects manufacturing capacity to increase to 340,000 tonnes per annum (+12% on-year) in FY18, while FY19 earnings growth is premised on higher utilisation rates in FY18-19E of 70%-85% and also a stable property segment.
Scientex expects its consumer packaging plant expansion to be completed by end-CY17. It will focus on ramping up capacity going forward, while the industrial packaging segment is focused on expansion in the US with contributions accreting mostly in FY19.
“We believe the group will allocate RM100mil to RM140mil for capex in FY18-19, which we have accounted for in our estimates.
“As for the property segment, the group has launched 16 projects worth RM617mil in FY17, which includes maiden launches in Ipoh, mainly consisting of affordable properties.
“Unbilled sales of RM500mil will be recognised over two to three years while the group is targeting RM800mil to RM1bil worth of launches in FY18,” it said.
The research house maintained its FY18E net profit of RM347mil and introduce FY19E net profit of RM361mil.
It did not expect additional capacity in FY19 (total capacity of 340,000 tonnes per annum in FY18), but FY19 growth is premised on increased utilisation for the manufacturing segment in FY18-19E of 70-85%, and stable earnings from the property segment.
Kenanga Research maintained its market perform and target price of RM8.50.
Its target price was based on its sum-of-parts FY18E valuations, applying an unchanged 6.8 times price-to-earnings ratio for the property segment, which is at a 10% discount to small-mid-cap property players due to Scientex’s exposure in the challenging Johor market, and 17.6 times applied PER for the manufacturing segment,” it said.
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