Scientex proposed to acquire 24 parcels of freehold agriculture land in Muar, Johor, measuring 442.8 hectares (1094.1 acres) for a total cash consideration of RM200.0mn (RM4.2/sf). We are cautiously optimistic about the long-term prospects of building its twelfth township in Johor, considering Muar is one of the proposed stations of HSR project. Maintain Sell with a revised TP of RM4.07/share based on SOP valuation.

Land Purchase in Muar, Johor

The group has signed a sales and purchase agreement to acquire 24 parcels of freehold land measuring 1094.1 acres in Muar Johor from Guan Hong Plantation Private Limited, which is incorporated in Singapore. The land is located along the frontage on both side of Jalan Muar-Yong Peng and is c.15km away (c.28-minute driving) from Muar town (Appendix 1).

Prepping for Its Twelfth Township in Johor

These lands are earmarked for a mixed-property development project. No GDV guidance was provided by the management as the land acquisition is still in preliminary stage. The acquisition is expected to be completed by 2HCY24. Nevertheless, we estimate the potential GDV for Muar lands is likely to be lower than Senai project (equivalent RM8.4mn/acre), Kota Tinggi project (equivalent 3.1mn/acre) and Durian Tunggal (Melaka) project (equivalent 2.9mn/acre) due its distance from Johor Bahru city centre and Malacca town.

Impact

The land acquisition will be financed through a combination of internal fund and borrowings. Meanwhile, the group is expected to maintain a healthy net gearing of 0.2x (previously stood at 0.2x) after the land acquisition. We make no change to our earnings forecast as we expect contributions to begin from FY26 onwards. Meanwhile, we are awaiting management’s guidance on the expected GDV.

Valuation

We revise out target price to RM4.07/share (previously RM3.89/share) based on 15x CY24 Manufacturing earnings and 11x CY24 Property earnings (from 10x previously). We are cautiously optimistic about the land acquisition, considering Muar’s inclusion as one of the proposed stations of KL-Singapore High Speed Rail (HSR) project. Maintain Sell

Source: TA Research - 6 Feb 2024