Kenanga lifts earnings outlook on Scientex

  • Analyst Reports
  • Monday, 21 Sep 2020

KUALA LUMPUR: Kenanga Investment Bank Research has raised its earnings projection on Scientex Bhd on the back of core earnings that beat expectations in FY20.

The research house said the group's core net profit of RM407.5mil beat its and consensus expectations at 116% and 111% of full-year estimates respectively.

"We believe the deviation was due to our conservative top-line estimate that overly anticipated weaker contributions from both the property and plastic segments due to the Covid-19 pandemic," it said in a note.

For Scientex's current financial year, Kenanga increased its core net profit forecast by 3% to RM455mil and set its FY22 core net profit at RM478mil on additional capacity increase moving forward.

Kenanga maintained its "market perform" on a higher target price of RM10 from RM9.70 previously and a post-bonus adjusted target price of RM3.33.

On outlook, the research house noted that Scientex is targeting affordable project launches with a sales target of RM1.3bil to RM1.4bil in FY21 to FY22, while unbilled sales of RM650mil provide less than one year's visibility.

The group's manufacturing segment is focused on ramping up utilisation, targeting 75% to 80% over the next few years, mostly from its BOPP plant and Arizona plant in the US on the back of RM159mil capex on the manufacturing segment in FY21, with another RM150mil spread out over FY22 to FY23.

Meanwhile, Kenanga is positive over Scientex's proposed two-for-one bonus share issuance as it will enhance trading liquidity via more affordable share price.

The group has also proposed an issuance of 103.37 million free warrants on the basis of one free warrant for every five shares.

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