• Maintain HOLD (TP: RM4.15). Scientex's 9MFY24 core PATAMI of RM422.1mn met both our in-house and market expectations, accounting for 78.9% and 76.7% of the full-year forecast, respectively. The group declared an interim dividend of 6 sen/share, making up 60% of our FY24 forecasted dividend assumption of 10 sen/share. 3QFY24 revenue inched up by 1.4% QoQ, thanks to improved revenue in the Packaging segment (+3.3% QoQ). However, the PBT margin declined by 1.2 ppts QoQ due to disappointing earnings from both the Packaging and Property segments. We make no changes to our FY24-26F earnings assumptions. Despite the global economic slowdown and challenging performance in Scientex's packaging division, we believe the company's overall performance will be offset by consistent and robust demand for its affordable housing. We maintain a HOLD call on Scientex, with an unchanged TP of RM4.15, based on the SOP valuation. Overall, we favour Scientex for its: 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 through its plastic product offerings.

• Key Highlight. For 9MFY23, revenue for the Packaging segment slightly declined by 3.2% YoY due to weak demand. Nonetheless, operating profit improved due to a better product mix and enhanced operational efficiency. Meanwhile, the Property segment showed tremendous growth, thanks to higher sales and sustainable construction progress in existing projects, as well as resilient take-up rates for new launches.

• Forecast. Unchanged.

• Outlook. The Group remains optimistic on prioritizing operational efficiency in their Packaging segment by focusing on cost control, quality, and customer delivery. Besides, the group is committed in enhancing its commitment to sustainable products. For the Property segment, it will continue to concentrate on expanding its affordable property market within Peninsular Malaysia. Overall, we believe the Group's earnings growth prospects remain encouraging driven by growth in the Property segment. The growth are leverages on resilient demand for affordable houses supported by upcoming launches in various states across Peninsular Malaysia as well as an effort to acquire competitively priced land in strategic locations to mitigate rising operational costs. However, we exercise caution on the Packaging segment due to weaker demand.

Source: BIMB Securities Research - 24 Jun 2024