KUALA LUMPUR: Scientex Bhd
's 1Q19 core earnings of RM52.7mil came in broadly within expectations, said Kenanga research.
The research house maintained market perform on the counter with a target price of RM8.50.
Kenanga said Scientex's first quarter results came in at 17% and 15% of its and consensus estimates due to lumpy progress biling from the property segment.
"Topline came in within at 22%, but the deviations vs. our estimates were mainly due to weaker property recognitions this quarter, which resulted lower than expected Group EBIT margins of 10.6% (vs. our expectation of 12.4%).
"This is because the property segment commands stronger EBIT margins (of c.30% vs. the manufacturing segment of 5% to 7%). However, we expect property recognitions and to pick up in coming quarters, aided by recent launches."
Kenanga said top line was up 9% from contributions in the manufacturing segment aided by constributions from the acquisition of Klang Hock Plastic as well as the groups operations in the US, partially offset by lower contributions from the property segment due to timing difference of revenue recognition.
Looking forward, Scientex's growth is premised on gradual improvements in utilisation rates for the manufacturing segment and full-year contributions from KHPI in FY19, said Kenanga.
"Maintain FY19-20E CNP of RM309-349m as we expect property recognitions to pick up in coming quarters. We are expecting launches of RM800-850m in FY19-20E, and manufacturing sector utilisation rates of 65-70% in FY19-20."
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