Kenanga Research is reducing its FY25 to FY26 earnings by 9% and 15%, respectively.
PETALING JAYA: Scientex Bhd
will continue to see heightened competition for the plastic packaging market and its margins may continue to be under pressure.
For the second quarter of its financial year 2025 (2Q25), Scientex posted a net profit of RM123.95mil, down from RM141.01mil, mainly due to competition in industrial packaging products.
Meanwhile, net profit for the first half of financial year 2025 (FY25) fell by 6% year-on-year on margin compression arising from lower average selling prices.
Turnover for the period was flattish as higher contribution from the property segment had offset the softer industrial films exports.
In view of this, Kenanga Research is reducing its FY25 to FY26 earnings by 9% and 15%, respectively.
“Amidst global tariffs uncertainties, we have also revised downward our price earnings (PE) ratio valuation on its plastic packaging business from 12 times to eight times following management’s latest guidance of a continuous challenging outlook for the segment.
“We tone down our target price to RM3.60 from RM4.24 and maintain a ‘market perform’ call,” the research firm said in a report yesterday.
According to Kenanga Research, Scientex’s management guided on a continuous challenging outlook for its plastic packaging segment.
“For its property division, we remain confident that the sales of its affordable properties will continue to be resilient given strong take-up rates from recent launches. The group’s current unbilled sales stood at RM1.7bil.”
It added that the ongoing progress of the Johor-Singapore Special Economic Zone will augur well with Scientex’s land banks and new launches in the southern part of Johor.
UOB Kay Hian Research (UOBKH Research) also lowered its target price to RM4.05 (from RM4.87), but upgraded the stock to a “buy” on valuation grounds.
The research firm believes that the negatives have largely been priced in and Scientex currently trades at below minus 2.0 standard deviation to its mean PE.
“We believe value has emerged,” said UOBKH Research.
It noted that the group’s property earnings were picking up.
“We understand that Scientex may increase the pace of its launches in tandem with the uptick in landbanking. However, we understand that this may not be within FY25, given the time needed to rezone and convert land titles.”
As for concerns on US tariffs, UOBKH Research foresees minimal impact on Scientex.
“We understand the United States only makes up around 10% of overall revenue and the existing plant in Phoenix, Arizona should minimise the impact of any potential tariffs on exports.
“Positively, the Arizona plant has been seeing increasing demand with current utilisation coming in at 40%.”
