Scientex (SCI)’s 1HFY14 net profit  of  MYR63.3m  was  within  our  and consensus  estimates,  at  43.3%  and  41.8%  of  the  respective  full-year forecasts,  on  taking  into  account  its  historically  stronger  second-half performance.  We  keep  our  forecasts  for  now.  Rolling  forward  our earnings  to  CY15,  we  arrive  at  a  new  SOP-based  FV  of  MYR7.19. Maintain BUY.

Largely  in  line.  SCI’s 1HFY14 revenue of MYR748.3m (+45.9% y-o-y) was  contributed  by:  i)  MYR577.7m  in  revenue  from  the  manufacturing segment  (+57.8%  y-o-y;  77.2%  of  total  revenue),  and  ii)  MYR170.6m revenue  from  the  property  segment  (+16.4%  y-o-y;  22.8%  of  total revenue). The higher turnover at the manufacturing segment was driven mostly by increased demand for SCI’s stretch film products from  the Asia-Pacific export market, while the property segment’s higher revenue was  attributed  to  growing  demand  for  SCI’s  new  property  project launches  in  Johor  and  Melaka.  All  in,  the company’s 1HFY14  core earnings  expanded  25.3%  y-o-y  to  MYR63.3m,  making  up  43.3%  and 41.8% of our and consensus’ full-year estimates respectively. We deem this  in  line  with  our  expectations  on  taking  into  account  the group’s historically stronger second-half performance.

Potential DPS of 19.0 sen in 2HFY14. No dividend was declared during the  quarter  under  review.  Nonetheless,  we  expect  management  to declare a DPS of 19.0 sen in the second half of the year, as we assume a  30%  payout  ratio.  This  would  likely  translate  into  an  annual  dividend yield  of  >3%  based  on  its last  closing price.  Our  projection is  based  on SCI’s relatively sturdy balance sheet and net gearing of 0.43x as of Jan 2014.

Maintain  BUY.  With  SCI’s  results  coming  in  largely  in  line  with  our expectations,  we  make  no  changes  to  our  earnings  estimates  at  this juncture. We reiterate our BUY recommendation on the stock, with a new SOP-based  FV  of  MYR7.19  (from  MYR6.36),  as  we  roll  forward  our earnings to CY15. We continue to like SCI’s: i) fast-expanding plastic film manufacturing segment, ii) reputable brand name in southern Malaysia’s property  market,  and  iii)  committed  management  team  under  the founding Lim family.

Financial Exhibits

SWOT Analysis

Company Profile

Scientex  Berhad  (SCI)  is  a  manufacturer  of  industrial  packaging  with  manufacturing  facilities  in  Malaysia  and  Vietnam.  It  also  has  a property development arm with projects concentrated in southern Malaysia.

Recommendation Chart

Source: RHB