UOBKH Research said the group has a unique dual-segment business model which complements its earnings stability.
PETALING JAYA: Scientex Bhd
will prevail as a defensive refuge for investors to weather potential cyclical downturns despite global market uncertainty, says UOB Kay Hian Research (UOBKH Research).
According to the research house, Scientex’s business has not been impacted despite geopolitical tensions in the Middle East and the US Federal Reserve’s higher-for-longer interest rates regime affecting global trade flows and investor sentiment.
It noted that the group has a unique dual-segment business model which complements its earnings stability.
“Its manufacturing segment will see better demand recovery on customer’ restocking, while its property segment will deliver supercharged growth as the group ramps up development of its existing land,” the research house said.
For the company’s property development segment, the issue of shortages of material, delays in obtaining regulatory approvals and worker shortages have been largely resolved, the research house added.
UOBKH Research said: “We believe that the group is working towards the delivery of 8,000 property units a year in the next few years.”
Meanwhile, the research house expects Scientex’s plastic manufacturing segment to be bolstered by positive export growth and surging demand throughout 2024.
It highlighted that Malaysia’s exports rose 2.2% year-on-year in the first quarter of 2024. The growth was reflected by the higher shipment of goods, economic recovery in China, an improvement in commodity prices, and a low-base effect from last year.
UOBKH Research said the group is on track to deliver 7% to 18% earnings growth from 2024 to 2025.
It noted that Scientex charted five-year earnings at a compounded annual growth of 10.2% through different business cycles from 2018 to 2023.
The research house said the stock’s current valuation of 11.5 times estimated price-earnings ratio for the financial year ending 31 July 2024 (FY24) remains attractive with a 13.4% upside according to the research house’s forecast FY24 valuations.
UOBKH Research is keeping its “buy” call on the stock with a target price of RM4.58.
