• Scientex Berhad (Scientex) announced that it has established a  joint venture (JV) with Mustika Land of Indonesia and Creed Group  of Japan to commence its initial venture into the construction of  affordable residences in Indonesia.

• We are optimistic about this new JV as will introduce the Scientex  brand to the regional market and serves as a starting point for the  group’s affordable property base outside Malaysia.

• No change to our earnings estimates as the contribution from this  JV is minimal at the Group level.

• Reiterate our BUY call on Scientex at TP of RM4.00 TP, derived based on SOP valuation.

Expanding Affordable House Development to Regional

Scientex through its subsidiary Scientex Quatari Sdn Bhd (STX) has entered into a JV with PT Graha Mustika Tamansari (PT GMT) and Creed  Property PH-1 Pte Ltd (CRD) to form a JV company to develop the Graha  Mustika Tamansari township in Bekasi, Greater Jakarta. PT GMT holds a 60% stake while STX and CRD holding 20% stake each. This JV  company will subsequently acquire land from PT GMT for phase 1  development which involves developing 400 affordable landed homes with estimated USD19mn gross development value (GDV) (c.  RM85.5mn). JV company will develop the Phase 1 of Graha Mustika  Tamansari of approximately 12 acres in 2023, with a goal of completing it by 2025.

JV with Reputable Partners

Notably, Mustika Land has been involved in 18 property development initiatives in Greater Jakarta region since 1995, comprising three township developments and commercial properties. Additionally,  Creed Group, a Japanese real estate investment firm, concentrates on property development within Southeast and South Asian nations such as Cambodia, Thailand, Indonesia, Vietnam, and Bangladesh. Note that  Creed Group has developed over USD3bn GDV projects in Southeast  Asia since 1996.

A Splendid Initiation

Scientex is now ready to initiate its cross-border approach for entering untapped markets within Southeast Asia and meeting the growing demand within the region. Though Scientex holds minimal stake in this  JV, Scientex will leverage its demonstrated proficiency in creating extensive township projects with high standards and efficiency,  underpinned by its in-house construction technologies that have defined the company's identity for 28 years. On that score, we are optimistic about this new JV as will introduce the Scientex’s brand to the regional market and serves as a starting point for the group affordable property base outside Malaysia.

No Change to Earnings Estimate

No change to our earnings estimates as the contribution from this JV is minimal at the Group level.

Reiterate BUY at TP of RM4.00

Maintain our BUY call on Scientex at TP of RM4.00 derived based on SOP valuation. Overall, we like Scientex due to its: i) organic expansion and M&A activities and hence, the group’s long-term growth, ii) steady position as affordable housing developer, and iii) high commitment on sustainability and environment for their plastic products.

Source: BIMB Securities Research - 22 Mar 2023