• Results Update – 2QFY17 net profit grew 13.2% Y.o.Y to RM5.4 mln, mainly due to higher domestic demand of plastic packaging products. Revenue for the quarter added 23.1% Y.o.Y to RM42.0 mln.

• For 1HFY17, cumulative net profit grew 13.0% Y.o.Y to RM10.9 mln, while revenue for the period increased 25.3% Y.o.Y to RM79.9 mln, which comprises of 58.4% and 41.6% in local and export sales respectively.

• Future Plans – To invest RM136.8 mln in capex over the next 3 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 in a new manufacturing plant in Kulai, Johor and will see the addition of new machineries such as 8 thermoforms, 4 extrusions and 1 cup machine. This will increase the extrusion capacity to 36.0 mln kg per annum vs. existing 25.0 mln kg per annum.

• Investment Highlights – Established leader in the thermo-form packaging with strong brand locally and globally. Also, it has an extensive variety of thermo-form packaging with a recession-proof customer base. Beneficiary of the ban on polystyrene packaging in Malaysia.

• At current price of RM3.42, PERs trading at 20.2x and 16.8x for 2017 and 2018 respectively puts SCGM’s valuation fair vs. its peers average of 19.5x. Dividend policy of minimum 40% pay-out from net profit – declared its second interim dividend of 2.0 sen per share, payable on 13th January 2017, bringing its total dividend to 4.0 sen. Maintains a healthy balance sheet with net cash position of RM7.1 mln .

Source: Mplus Research - 14 Dec 2016