KUALA LUMPUR: Affin Hwang Capital research is initiating coverage on Sceintex Bhd with a buy rating and a target price of RM10.10.
In a research note today, Affin Hwang said Scientex has an impeccable earnings track record and execution, largely attributable to a solid management team.
"Riding on global demand for stretch films and a successful property strategy, we forecast a
FY18-21E EPS CAGR of 10.2%.
"At 12.7x FY20E, valuation looks attractive and shares could further re-rate amidst its yet limited institutional ownership."
According to the research house, Scientex aims to hit RM10bil in revenue by 2029 through organic and M&A-led expansion, which implies a 10-year revenue CAGR of 14.3%.
The Vision 2028 strategy also entails the building of 50,000 units of affordable homes, of which 17,000 have been builts since 1995.
Affin Hwang said the group's property launches have been very saleable due to its focus on affordable housing.
"In the nearer term, Scientex’s property prospects will be supported by unbilled sales of RM500m (as at 1QFY19) and RM1.0bn worth of project launches coming in FY19 (FY18 project launches of RM1.2bn). S
"Scientex’s GDV of RM13.5bn is expected to sustain the group over the next 10 years."
In the manufacturing division, average utilisation rates are expected to grow to 70% to 77% over FY18-21E from about 66% in FY18.
"Elsewhere, we expect pressure on manufacturing margins to ease from FY20E on softer
resin prices and a higher-margin mix, negated by a stronger RM (vs. US$)," it said.
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