• Maintain HOLD (TP: RM4.50). Scientex's FY24 core PATAMI of RM535.7mn was in line with both our in-house and market expectations, representing 100.1% and 97.2% of the full-year forecasts respectively. The group declared a final dividend of 6 sen per share for FY24, translating to a 1.7% dividend yield. In 4QFY24, revenue improved by 5.4% QoQ, thanks to higher revenue in the Property segment (+14.6% QoQ), despite a muted impact from the Packaging segment (-0.8% QoQ). However, the PBT margin declined by 1.0 ppts QoQ due to lower earnings from both the Packaging and Property segments. We make no changes to our FY25-26F earnings assumptions. Despite the challenging performance in Scientex's packaging division, we believe the company's overall performance will be offset by consistent and robust demand for its affordable housing. We maintain a HOLD call on Scientex, with higher TP of RM4.50 (from RM4.15 previously) as we rolled over our valuation to FY26F, based on the SOP valuation. Overall, we favour Scientex for its: i) organic expansion and M&A activities for potential long-term growth, ii) strong position as an affordable housing developer, and iii) high commitment to sustainability and the environment through its plastic product offerings.

• Key Highlight. For the packaging segment, the utilization stood at 59%, consistent with the previous year. The composition of industrial and consumer packaging remains similar with a slight skew towards industrial packaging. Overall, sales volume in the packaging segment was primarily driven by the industrial segment. Meanwhile, for the property segment, the FY24 gross development value (GDV) stands at RM1.9bn, slightly lower than FY23’s RM2.1bn due to delays in some projects. Unbilled sales for FY24 are reported at RM1.8bn.

• Forecast. Unchanged.

• Outlook. The Group remains focused on operational efficiency in its Packaging segment through cost control, quality, and customer delivery while enhancing its commitment to sustainable products. In the Property segment, the group aims to expand its affordable housing market in Peninsular Malaysia, supported by resilient demand and upcoming launches. We are of the view that earnings growth prospects are encouraging driven by property expansion and strategic land acquisitions to offset rising costs. However, caution is advised for the Packaging segment due to weaker demand.

Source: BIMB Securities Research - 25 Sept 2024