• Maintain HOLD (TP: RM4.50). Scientex's 1QFY25 core PATAMI of RM127.6mn was in line with both our in-house and market expectations, making up 21.9% and 21.2% of the full-year forecasts respectively. Despite the underperformance in Scientex's packaging division, we anticipate that the company's overall performance will remain resilient, driven by sustained and robust demand for its affordable housing segment. This demand is expected to offset the challenges faced in Packaging segment, providing a balanced growth outlook for the Group. We maintain a HOLD call on Scientex, with unchanged TP of RM4.50. Overall, we believe Scientex’s business performance 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 through its plastic product offerings.

• Key Highlight. 1QFY25 revenue and operating profit (OP) decline -5% QoQ and -0.2% QoQ respectively, no thanks to slower revenue from both Packaging (-3.9% QoQ) and Property (-6.4% QoQ) segments. Also, OP was weighed down by slower earnings in Packaging segment (-31.5% QoQ) despite surged in Property segment (+10.5% QoQ). During this period, the Packaging segment experienced a slight decline, operating at 58% compared to 59% in the previous quarter. Additionally, the group highlighted the encouraging take-up rates for ongoing projects in Sungai Petani, Sungai Dua, Jenjarom, Pulai, and Bandar Jasin. The total unbilled sales as of October 2024 stand at RM1.7bn.

• Forecast. Unchanged.

• Outlook. The group continues to prioritize operational efficiency within its Packaging segment by focusing on cost management, quality control and timely customer delivery while reinforcing its commitment to sustainability. In the Property segment, Scientex plans to capitalize on the robust demand for affordable housing in Peninsular Malaysia, underpinned by planned developments and upcoming property launches. Overall, we are optimistic on Property segment outlook as earnings growth is expected to be driven by the expansion of the property portfolio and strategic land acquisitions. However, we advise caution on the Packaging segment where weaker demand may pose challenges to growth.

Source: BIMB Securities Research - 19 Dec 2024