• Scientex posted surprisingly strong results – FY20 core net profit rose 20% yoy to RM422m on better performance at its property and manufacturing segments
• Results were above market and our expectations – accounting for 114% and 119% of respective full-year forecasts
• Given the better-than-expected results, we raise our FY21-22E core EPS by 20- 28% and TP to RM13.20 (from RM11.20); we reaffirm our BUY rating

FY20 core net profit rose by 20% yoy, exceeding expectations

Scientex’s FY20 core net profit rose by 20% yoy to RM422m, on the back of stronger performances from both the manufacturing and property divisions. Property EBIT grew 4% yoy to RM298m, contributed by steady progress billings from affordable residential projects in Johor, Melaka and Selangor. Manufacturing EBIT also ballooned by 43% yoy to RM251m on higher domestic sales (+21% yoy, due to contribution from Daibochi’s converting business) as well as better margins on favourable product mix, lower resin costs and higher efficiency. Overall, results were ahead of expectations, accounting for 114% of street and 119% of our earnings forecasts. The variance against our forecast was largely due to better-than-expected margins in the manufacturing segment.

Sequentially better by 88% qoq on low base effect

Sequentially, Scientex’s 4Q FY20 core net profit rose by 88% qoq to RM156m on the low-base effect. Back in 3Q FY20, Scientex’s business operations were disrupted by the COVID-19 Movement Control Order: manufacturing entities were allowed to operate at minimal capacity to comply with the SOP imposed by the authorities while the property division’s operations were closed during the period.

Property: aggressively exploring land-banking opportunities

For the property segment, Scientex continues to see average c.70% take-up rates for its affordable homes across Peninsular Malaysia. We expect near-term property numbers to be supported by current unbilled sales of RM650m and target GDV of RM1.6bn (c.6k units across 24 property launches). To achieve its Vision 2028 of delivering 50k affordable homes, the Group is still aggressively pursuing land-banking expansion, with its latest acquisition of: 1) 1,515 acres in Jasin, Melaka, 2) 109 acres in Seremban, Negeri Sembilan and 3) 139 acres in Cheras, Selangor. Based on the briefing information, Scientex’s landbank as at 4Q FY20 increased to 5,504 acres (from 3,795 acres in 4Q FY19) with a future estimated GDV of RM27.8bn (from RM22.0bn in 4Q FY19).

Source: Affin Hwang Research - 21 Sept 2020