Scientex’s FY15 earnings were largely in line with expectations. Maintain BUY, with a revised SOP-based TP of MYR8.30 (from MYR8.80, 18% upside). It is on track to grow its consumer packaging unit over the medium term, which should provide an earnings boost to offset the flattish growth for industrial packaging. Meanwhile, we are cautious on its property division, given the overall weak property market sentiment.

In line. Scientex’s FY15 (Jul) core earnings (excluding forex loss and fair value gains) of MYR163.6m came in line, at 104%/100% of our/consensus estimates respectively. The company’s full-year revenue growth continues to be driven by the growth in its consumer packaging (+20% YoY) and property development (29.5% YoY) segments. A MYR27.2m forex loss was recorded for FY15, which stemmed from the paring down of its USD-denominated debt. A final dividend of 13 sen per share was declared, bringing total DPS to 22 sen for FY15.

Positive growth prospects ahead. Management has guided that its consumer packaging expansion plans are on track. New plants for itscast polypropylene (CPP) and bi-axially oriented polypropylene (BOPP) film production are slated to begin operating by mid-2016. With all these developments materialising over the next 1-2 years, this division will likely be able to record double-digit growth over the next few years. For its property division, it has guided for c.MYR600m of new launches for FY16, with a focus on affordable housing, which should bode well with the current market appetite. That said, we continue to be cautious on the short-term prospects for the property segment given the current soft market conditions.

Forecasts. Our FY16/FY17 numbers are adjusted by 2.6%/1.6% after updating our FY15 numbers. We also introduce our FY18 estimates.

Maintain BUY. Our SOP-based TP is revised to MYR8.30 (from MYR8.80) after updating for full-year numbers and ascribing a wider discount to RNAV of 35% (from 30%) for its property segment due to the softer property market outlook. W e continue to like the stock for: i) its long-term earnings prospects that leverage on the expansion strategies for both its manufacturing and property divisions, ii) relatively sturdy balance sheet, and iii) committed management team.

Briefing Highlights Consumer packaging to drive future growth. Management has updated that its consumer packaging expansion plans are well underway. We view this positively in light of the flattish growth prospects for the industrial packaging segment. The construction of its new BOPP plant in Pulau Indah is almost fully completed, and is on target to commence operations in Apr 2016. Recall that with the added production lines from this plant, the company is targeting to increase BOPP production by almost tenfold to 60,000 tonnes annually (from 6,000 tonnes presently). Furthermore, it completed the construction of its new CPP plant in August, and this plant is slated to start its commercial run by end-2015, with total annual capacity of 12,000 MT. The growth in its polyethylene (PE) film division is also on track, with the recent acquisition of Mondi Ipoh SB’s production plants increasing production output by 14,400 tonnes pa, with room for further expansion. With all these developments materialising over the next 1-2 years, we believe that this division will likely be able to record double-digit growth over the next few years.

To launch more affordable housing products. For its property division, management has guided for about MYR600m of new launches for FY16, with a focus on affordable housing (priced at MYR500k and below), which should bode well with the current market appetite. Management is also confident that its total sales for FY16 will at least match FY15’s recorded sales of MYR606m. That said, we continue to be cautious on the short-term growth prospects for property development, given the overall soft property mret, especially in Johor, where all of Scientex’s landbanks are located. Management has also guided t hat it will not be aggressively seeking for new landbank, as it has recently received shareholders’ approval for the proposed acquisition of a 326-acre parcel of land in Pulai, which will increase its total available landbank to 1,200 acres.Key risks. Key risks to earnings include: i) delay in commencement of new plants and ii) heightened competition risks for its manufacturing division.