1QFY22 CNP of RM112.7m came in within both our and consensus estimates at 22% each. No dividend as expected. QoQ, CNP was lower due to lower progress billings from its property segment. We maintain our FY22E/FY23E earnings estimates. Maintain MP with unchanged SoP-TP of RM4.42.

1QFY22 results within expectation. 1QFY22 CNP of RM112.7m came within expectation at 22% each of both our and street’s full-year estimates. No dividend as expected for 1QFY22.

YoY, revenue was up by 15.7% mainly driven by higher sales for both its property and manufacturing segments. The revenue of property segment was up due to the strong progress billings and good take-up rate for new launches worth RM131m at Tasek Gelugor, Penang and Pulai, Johor. Group EBIT rose 5.1%, mainly lifted by property EBIT (18%) although manufacturing EBIT declined by 6%. The decline in the plastic manufacturing segment is mainly due to higher production costs and Covid-19 related expenses. The group recorded CNP of RM112.7m with a lower effective tax rate of 17% (vs 1QFY21: 22%).

QoQ, revenue dipped 4.3% on lower property revenue (-29%) due to lower progress billings from its ongoing project and a limited 60% workforce capacity. Group EBIT declined 24.2% due to higher operational costs from the property segment (-42%). Despite the higher raw material cost and production disruption, the manufacturing EBIT rose 13% due to a better product mix. All in, CNP declined by 19% to RM112.7m.

Moving forward, the group will continue to target the affordable housing segment and has earmarked RM2b worth of launches for FY22, while its unbilled sales of RM965m provide less than one year’s visibility. For its manufacturing segment, we believe that SCIENTX will continue to focus on ramping up its utilization rate and capacity expansion. However, we remain cautious of its converting business due to higher raw material costs and freight costs dragging margins. We continue to expect growth for SCIENTX on the back of: (i) strong progress billing in its property segment, and (ii) better product mix in its plastic manufacturing segment.

Post results. No changes to FY22E/FY23E earnings.

Maintain MARKET PERFORM with unchanged SoP-derived TP of RM4.42 based on FY22 earnings estimates. We maintain our ascribed 14.3x PER for the plastic manufacturing segment and 13x PER for the property segment.

Risks to our call include: (i) higher-than-expected resin cost, (ii) weaker product demand, (iii) weaker-than-expected property sales, and (iv) foreign currency risk.

Source: Kenanga Research - 9 Dec 2021