• Scientex Berhad (Scientex) announced that its wholly owned subsidiary, Scientex Park (M) Sdn Bhd, has entered into a conditional Sale and Purchase Agreement with Metalplex Plantation Sdn Bhd for the proposed acquisition of 826 acres of freehold land at Batang Berjuntai, in Kuala Selangor, Selangor for a total purchase consideration of RM336mn.

• We are positive about this acquisition, acknowledging its inherent value and potential, strengthen its position as affordable house developer in Selangor. Additionally, the valuation of land price is deemed fair and reasonable, further enhancing the desirability of the deal.

• No change to our earnings estimates pending GDV guidance from management.

• We maintain a HOLD recommendation on Scientex with an unchanged TP of RM4.15. Our valuation is derived from a Sum of Parts (SOP) methodology.

Muar landbank acquisition

Scientex, through its subsidiary Scientex Park (M) Sdn Bhd has proposed to acquire a freehold land in Batang Berjuntai, Kuala Selangor. The total purchase consideration for this “Agricultural land” is amounting RM336mn, covering an extensive area of approximately 826 acres. The proposed acquisition involves obtaining the land from Metalplex Plantation Sdn Bhd. The acquisition will be funded by internally generated funds and bank borrowings. The land is strategically positioned between Ijok Town and Bestari Jaya Town, situated at the intersection of Jalan Kuala Selangor and Jalan Bukit Badong (Ijok Town). Accessible via the dual carriage lanes of Jalan Bukit Badong, the land provides convenient connectivity to both Bestari Jaya Town and Ijok Town. Notably, the land is approximately 25km and 36km away from two significant existing developments, namely Scientex Kundang Jaya and Scientex Rawang respectively.

On track to expand landbank and deliver 50,000 affordable homes

The lands are expected to be developed into a mixed-property development. In addition, management guided that it is too early to ascertain the total gross development value (GDV) of the lands and its future contributions. Besides, the acquisition is expected to be completed by 1HCY2025.

Acquisition cost at RM9.33/sqft

We are positive on the deal as it would accelerate the group's strategic objectives of expanding its property development footprint in Selangor. Based on our calculations, the cost of this land will be RM9.33/sqft. We believe the acquisition represents a fair and prudent investment, considering the agricultural land status. On top of that, given Scientex's current 0.1x net gearing as of 1QCY24, we are confidence in their capacity to successfully finance this acquisition.

No Change to Earnings Estimate

We make no change in earnings forecasts pending GDV guidance from management.

Reiterate HOLD at TP of RM4.15

Maintain a HOLD recommendation on Scientex with an unchanged TP of RM4.15. Our valuation is derived from SOP valuation. Overall, Scientex business prospect is to be driven by i) organic expansion and M&A activities for potential long-term growth, ii) strong position as an affordable housing developer, and iii) high commitment to sustainability and the environment in their plastic product offerings.

Source: BIMB Securities Research - 11 Mar 2024