Sclentex Bhd ("Scientex"), one of the world's largest stretch film producer and cn affordable property developer in Peninsular Malaysia with consistent earnings track record has achieved a 10-year CAGR of 15% in revenue and 20% in net profit. Recommend BUY with a target price of RM9.70 based on 14x blended PER FY20 as per closest related peers in plastics packaging and property players. 

Under a growth-centric management team, the manufacturing division has been growing at a 4-year CAGR of 12% In revenue buoyed by value accretive acquisitions namely Great Wall Plastics Industries Bhd (2013), Seacera Polyfilms S/B (2014), Mondi ipoh S/B (2015), Kiang Hock Plastics Industries S/B (2018), and Dal bochl Bhd (2019). The strategic acquisitions and partnerships have been proven synergistic, strengthening Scientex's supply chain as both upstream and downstream player with comprehensive product range supported by 18 manufacturing facilities worldwide. Scientex as the biggest stretch film producer in Asia, has more than 70% of the manufacturing products exported to over 60 countries. 

On the property side, Scientex plans to launch RM1.1b worth of projects in FY19 while Its current unbilled sales stand at RM600m. Being one of the reputable township developers In Johor (Taman Scientex Pasir Gudang), the group has a current and on-going GDV of RM13.3bspanning across Peninsubr Malaysia, expected to sustain the group for more than 10 years. Most notably, management aims to hit RM I Ob in total revenue and to build 50,000 affordable homes by year 2009. To date,

Sclentex has completed 17,822 units of affordable homes of which 75% are priced below RM300k garnering a healthy take up rate.  Sclentex has a dividend policy of 30% and is expected to deliver a dividend yield of 2.8% in FY20. Meanwhile, gearing ratio remain manageable at 0.4x. Through Its dual-business strategy, we expect EPS to grow by 13.7% In FY20 backed by higher manufacturing utilisation rate and take up of its properties.

Source: Rakuten Research - 25 Mar 2019