Review

• Scientex Berhad's (Scientex) FY24 core earnings came in within expectations, meeting 100% of our forecast and 97% of the consensus full-year estimate.

• Core net profit for FY24 increased by 15.7% YoY to RM536.4mn, supported by a 9.8% YoY rise in revenue to RM4.5bn. The commendable results were mainly driven by improved performance in the property segment.

• The property segment's EBIT increased by 27.8% YoY to RM518.5mn, in tandem with a 29.7% YoY rise in sales to RM1.9bn. This was attributable to steady progress billing and resilient take-up rates of approximately 80% for the launches in FY24.

• On the other hand, the manufacturing segment's revenue remained flat at RM2.6bn compared to the previous year. Despite the weaker top line, EBIT increased by 18.5% YoY to RM218.0mn, driven by an improved sales mix and greater operational efficiency.

• In 4QFY24, core earnings increased by 9.2% QoQ to RM139.8mn, while revenue grew by 5.4% QoQ to RM1.2bn. Robust sales in the property segment (+14.6% QoQ) offset the weaker performance (-0.8% QoQ) in the manufacturing segment, primarily due to lower average selling prices.

• A single-tier final dividend of 6.0sen/share was declared for 4QFY24 (4QFY23: 5.0sen/share), bringing the YTD dividend to 12.0sen/share (FY23: 10.0sen/share).

Impact

• After inputting the FY24 figures, we revised our FY25/26 forecasted core earnings upwards by 0.2%/3.1%, respectively. Briefing Highlights

• Manufacturing. The demand for the packaging sector is expected to remain soft, particularly in consumer packaging. This is mainly due to pricing competition from China players who are offering lower prices. Notably, the sales mix for consumer and industrial packaging is evenly split at approximately 50% in FY24. Looking ahead, we expect a gradual recovery in demand for FY25, as we observed an improvement in overall sales volume of around 4.0% YoY in FY24, which offsets the slight decline in ASP.

• The group plans to install solar PV panels at 10 manufacturing plants in Malaysia, with an expected capacity of 21-megawatt peak (MWp). The installation is projected to be completed by January 2025, with a Capex of approximately RM100.0mn in FY25.

• Property. In FY24, Scientex launched properties worth RM1.9bn, slightly lower than the RM2.1bn in FY23, owing to delays in obtaining approvals for various projects. Nevertheless, the group achieved an approximate 80% take-up rate, indicating resilient demand for affordable housing. For FY25, management aims for a higher GDV launch of over RM2.0bn, backed by its rich landbank of 10,277 acres (+41.6% YoY). Overall, we remain positive on the outlook, driven by i) unbilled sales of RM1.8bn for FY25, ii) a potential GDV value of RM50.0bn from its total landbank, and iii) an 80% take-up rate for launches in FY25. Thus, we anticipate a resilient EBIT margin of 30.8% for FY25F (vs. 27.6% in FY24).

Valuation

• We maintained Buy on SCIENTX with a revised TP of RM5.48/share (previously: RM5.41/share) based on Sum-of-Parts (SOP) valuation.

Source: TA Research - 25 Sept 2024