Period

2Q15/1H15

Actual vs. Expectations

1H15 net profit of RM66.3m was within our expectation, at 51% ofour full-year estimates of RM131.1m. However, it came in belowmarket expectation, making up only 37% of the street’s FY15estimates of RM180.5m, largely due to consensus’ very bullishaverage net margin assumption of 9.9% vs. actual 1H15 of 7.8%.

We deem 1H15 property sales of RM397.0m was within ourexpectation, which make up 57% of our sales projection ofRM692.0m.

Dividends

No dividends were declared for the quarter, as expected.Keyhighlights

2Q15 net profit rose 19% QoQ to RM36.1m on the back of a 7%hike in revenue. The increase in revenue was mainly driven byproperty segment (+23% QoQ), while EBIT margins were relativelystable at 29.7%.

YoY, 2Q15 net profit grew 6% while revenue rose 21%. Bottomlinegrowth was disproportionate against revenue mainly due to realizedforex loss of approximately RM9.2m on USD-denominatedborrowings and trade settlements as a result of weakening of MYR.

YTD, 1H15 revenue rose by 19% YoY, on the back of: (i) 12%increase in manufacturing revenue arising from better sales fromboth industrial (+2% YoY) and consumer packaging products(+31% YoY), (ii) 45% jump in property revenue led by higherrecognition across all project developments. However, net profitgrowth was more muted at 5% largely due to the manufacturingdivision experiencing FOREX losses, as explained above.

Outlook

The expansion of its CPP (total 12k MT p.a.) and BOPP films (total60k MT p.a.) capacities for its consumer packaging division is ontrack and expected to be completed by end of 2015 and mid of2016, respectively. We have yet to factor in any earnings for thiscapacity expansion pending details from management.

Moving forward, SCIENTX will be less impacted by weakening ofMYR after the company reduced their USD borrowings exposure to58% as of 2Q15 (vs. 77% in 1Q15).

The overall property market is expected to be challenging in 2015,especially in Johor. However, SCIENTX is targeting to launch moreaffordable houses (c.90% of total launches) in next two yearsshould provide some earnings resiliency.

Change to Forecasts

We are maintaining our FY15-16E earnings as resultsare in line.

Rating

Maintain UNDERPERFORM

We maintain our UNDERPERFORM call as manufacturing earningsgrowth from capacity expansion will only kick in from FY17onwards, while property segment outlook remains unexciting in thenear-term. SCIENTX is currently trading at CY15-16E PER of10.8x-9.7x, which is slightly above sector average CY15-16 PER of10.1x-9.3x.

Valuation

Our SoP-based TP is increased to RM5.79/share fromRM5.49/share previously as we roll over our manufacturing segment valuation base year to FY16.

Our targeted PER of 11x for manufacturing segment is based on10% premium to its closest peer TGUAN (ascribed PER of 10x).The premium is applied for its bigger market cap compared toTGUAN.

For property division, we applied discount to FD RNAV to 50%, which is steeper than the average applied property sector RNAVdiscount of 44% due to the neutral-to-negative outlook for the property market in Johor.

Risks to Our Call

Lower crude oil/resin prices lowering production costs.

A strong pickup in Johor property market post GST implementation.

Source: Kenanga Research - 24 Mar 2015