Results Update

SCGM BHD recorded a lower 4QFY16 net profit of RM3.5 mln vs. Tm5.1 mln in 4QFY15. Revenue for the quarter, however, rose 25.6% Y.o.Y to RM32.5mln.

For FY16, cumulative net profit grew 30.6% Y.o.Y to RM20.2mln, while revenue for the period increased 25.2% Y.o.Y to RM133.5mln, which comprises of 52.9% and 47.1% in local and export sales respectively.

Future Plan

Will invest RM113.8mln in capex over the next three years for a new manufacturing facility–source of the said amount would come from internally generated funds, bank borrowings and capital markets. Meanwhile, the new manufacturing facility would be built on a new 7.8ac. land in Kulai, Johor and SCGM will see the addition of new machineries such as eight thermoforms, four extrusions and a cup machine.This will increase the extrusion capacity by 194.0% to 49.5mln kg per annum vs.16.8mln kg on a year.

Investment Highlights

SCGM is an established leader in the thermo-form packaging with strong brand name locally and globally. Also, it has an extensive variety of thermo-form packaging with a recession proof customer base. Valuationwise, the company’s current PER valuation of 21.3x is significantly higher than its 5-year average PER of 11.8x.

Meanwhile, the company has a dividend policy of at least 40.0% from the group’s net profit. For FY16, SCGM declared its fourth interim dividend of 2.0sen per share, payable on 27thJuly2016, bringing its total dividend to 10.0sen. The company is still in a net cash position, whileits FY16 net asset stood at RM0.84 per share, which translates into a 37.7% Y.o.Y gain (from RM0.61 in FY15), mainly attributable to the private placement exercise and excess net operating cash flow.

Source: M+ Online Research - 27 June 2016