ss
Sfor
JUPITER SECURITIES RESEARCH
For Internal Circulation Only
Mar 31st, 2015
Results Note
Scientex Berhad
RM6.89
Period: 3QFYJul15
BUY
Target (RM)
MASA Codes
Bloomberg
RM8.32
SCIENTX / 4731
SCI MK
Stock & Market Data
KLCI
1706.64
Listing
Main Market
Sector
Industrial Products
Syariah Compliance
Yes
Par Value
RM0.50
Issued Shares
230.0m
Market Capitalisation
RM1,584.0m
1-year return
21.6%
52-week Hi/Lo
RM5.66 / RM7.63
1-month Average Volume
0.3m shares
Estimated Free Float
25%
Major Shareholders: Chairman Lim Teck Meng & related
58.5%
Lembaga Kemajuan Tanah Persekutuan
1.4%
Key Indicators @ FY15
10.4
PER (x)
1.9
PBV (x)
72.4
Net Debt/Equity (%)
21.7
ROE
Dividend: A 9sen dividend was declared for the quarter.
Scientex has a dividend policy of minimum 30% payout.
Actual versus expectations: 9MFY15 earnings made
up 78.7% of our full year earnings forecast. Hence we
deem the results to be above expectations. In 1H,
Scientex recognised forex loss of RM15m (2Q loss was
RM9.7m) after halving its USD loan exposure. In 3Q
there was a net forex loss of RM3.1m, bringing ytd forex
loss to RM18m.
Result highlights: For 3Q, the Group recorded revenue
of RM455.3m, an increase of 6.7% y/y. Profit before tax
was at RM56.5m, an increase of 17.5% y/y.
Manufacturing revenue was at RM318.8m, marginally
higher compared to RM317.2m last year while profit from
operations increased from RM16.3m to RM20.0m, an
increase of 22.3%, mainly due to better sales and
margins from consumer packaging products.
Property revenue increased 24.6% y/y to RM136.5m, due
mainly to higher progress billings and sales from Taman
Scientex Senai and also ongoing projects in Taman Scientex Pasir Gudang and Taman Scientex Kulai. These
projects are mainly focused on affordable homes. The sales and progress billings for niche projects in Taman
Mutiara Mas and Taman Muzaffar Heights remained satisfactory.
Table 1. 3QFY15 results
FY Jul / RM'm
3QFY15
Revenue
455.3
Operating profit
58.4
Interest exp
(2.2)
Invest result
0.3
Pretax profit
56.5
Tax exp
(12.6)
Profit after tax
44.0
MI
(1.0)
Profit to shldrs
43.0
EPS (sen)
19.02
EBITDA
69.4
Ops profit margin
12.8%
Pretax margin
12.4%
Tax rate
-22.2%
After tax profit margin
9.7%
EBITDA margin
15.2%
3QFY14
426.8
49.0
(1.8)
1.0
48.1
(10.9)
37.2
(0.8)
36.3
16.43
58.9
11.5%
11.3%
-22.7%
8.7%
13.8%
2QFY15
462.9
48.0
(1.9)
1.2
47.3
(10.2)
37.1
(1.1)
36.1
15.98
58.7
10.4%
10.2%
-21.5%
8.0%
12.7%
y/y chg % q/q chg % 9MFY15
6.7
(1.6)
1349.2
19.2
21.5
147.9
17.6
15.8
(6.0)
(66.4)
(72.5)
2.1
17.5
19.5
144.0
15.1
23.3
(31.7)
18.3
18.4
112.3
20.4
(6.3)
(3.0)
18.2
19.1
109.3
15.8
19.0
48.69
17.8
18.1
180.3
1.3%
2.4%
11.0%
1.1%
2.2%
10.7%
0.5%
-0.7%
-22.0%
0.9%
1.6%
8.3%
1.4%
2.6%
13.4%
JUPITER SECURITIES SDN BHD
9MFY14
1175.1
133.4
(5.2)
2.1
130.3
(28.6)
101.7
(2.1)
99.6
45.04
162.9
11.4%
11.1%
-21.9%
8.7%
13.9%
y/y chg %
14.8
10.9
14.6
0.0
10.5
11.0
10.4
43.8
9.7
8.1
10.7
-0.4%
-0.4%
-0.1%
-0.3%
-0.5%
JUPITER SECURITIES RESEARCH
Profit from operations increased by 27.8% y/y to RM41.5m. The increase was in tandem with the increase of
revenue boosted by better margins recorded by the affordable products sold in Taman Scientex Senai.
For the 9-months period, the Group recorded revenue of RM1,349.2m, an increase of 14.8% y/y. Profit before tax
increased to RM144.0m, up 10.5% y/y, despite recognition of a foreign exchange loss of about RM18.0m due to the
weakening of RM against USD. Manufacturing segment recorded revenue of RM966.1m, an increase of 8.0% y/y,
due to the better sales of both the industrial and consumer packaging products while profit from operations
increased to RM52.1m. Property segment’s revenue of RM383.1m was an increase of 36.7% y/y, while profit from
operations increased to RM113.8m. The better performance was due to higher progress billings and resilient sales
from affordable home segment in particular Taman Scientex Senai and satisfactory contribution from niche projects
in Taman Mutiara Mas and Taman Muzaffar Heights.
Growth Strategies
Manufacturing
Scientex will invest capex of RM300m from 2014-2016 to expand consumer-packaging business. It will increase PE
film production output from 48,000mt p.a., to 60,000mt p.a. by 2016. A 10-color printing machine will be installed in
mid-2015. This is to target increase sales of more value-added products. A new CPP film plant will be completed in
July 2015, and is targeted to commence commercial run by end-2015. Capacity is 12,000mt p.a. and this will
complement its PE and BOPP businesses, leveraging on its existing clientele in Malaysia and South East Asia. It
has commenced construction of the BOPP plant in February 2015 – in partnership with Japan’s Futamura Chemical
Co. Ltd. On completion, BOPP production will increase by 10-fold to 5,000mt per month. Commercial run is
expected to commence in mid-2016.
Property
Scientex will continue to develop innovative properties, and increase affordable housing launches in Johor to meet
demand. Unbilled sales stand at RM599.1m that will be recognised over the next 2-3 years. It has a pipeline GDV
of about RM4bn that will to sustain group for 8 years. In May, Scientex undertook the construction of 1,420 units of
affordable properties in Pasir Gudang under the Johor Affordable Housing Scheme / Skim Rumah Mampu Milik
Johor (RMMJ). The first phase comprised of 479 units Pakej B (RM80,000 per unit) and 239 units RMMJ
(RM150,000 per unit) homes, while the balance will be launched in stages until 2017. Scientex is proposing to buy
326 acres in Pulai, Johor for RM219.0m. This will boost its undeveloped landbank 1,200 acres.
Investment merits
•
In the manufacturing segment, we continue to see growth from both the industrial packaging segment
and consumer-packaging segment. Coming from a smaller base, growth potential would be higher in
the consumer packaging segment but only if intensive marketing is undertaken, as orders for this
segment are smaller vis-à-vis the industrial segment.
•
Property development will benefit from strategic mix of more affordable housing versus high-end
projects. The value of its current on-going projects amounts to RM1.4bn.
•
Management’s vision is to double the profit in 5 years. Even though Scientex has to preserve cash to
fund its expansion, it has mandated a minimum dividend payout of 30% of net profit.
We continue to see the manufacturing division providing the growth impetus via the capacity expansion, while
the property division will be cash provider, due to its resilient sales, to fund manufacturing’s expansion and
the dividend payout.
The opinion and information contained herein are based on available data believed to be reliable and this report is provided for information purposes only. It is not to be construed as
an offer, invitation to buy or sell the securities mentioned herein. Jupiter Securities Sdn Bhd does not warrant the accuracy stated in any manner herein and no reliance upon such
things by anyone should give rise to any claim whatsoever. The directors and staff of Jupiter Securities Sdn Bhd may have an interest in the securities mentioned.
JUPITER SECURITIES SDN BHD
JUPITER SECURITIES RESEARCH
Valuation and recommendation
We tweaked our forecast to take into account of the
better performance in 3Q. Our new earnings per
share (EPS) forecast for FY15 and FY16 is 66.0sen
and 72.6sen, respectively. Retaining our valuation
criteria of 12x PER, and based on average EPS for
FY15 and FY16, our fair value of Scientex is
upgraded to RM8.32. We reiterate our BUY
recommendation.
Table 2. Profit & Loss forecast
FY Jul / RM'm
FY16(f)
Revenue
1985.0
EBITDA
274.5
EBIT
226.5
Investing Results
4.0
Pretax profit/(loss)
216.5
Net Profit/(loss)
164.0
EPS (sen)
72.6
PER (x)
9.5
Dividend (sen)
22.0
Dividend yield (%)
3.2
Net asset/share (RM)
4.11
Price/book (x)
1.7
EBITDA margin (%)
13.8
EBIT margin (%)
11.4
Net profit margin (%)
8.3
Tax rate (%)
21.0
FY15(f)
1829.0
247.0
203.1
4.0
195.1
149.2
66.0
10.4
21.0
3.0
3.61
1.9
13.5
11.1
8.2
22.0
FY14(a)
1590.6
229.2
189.6
3.8
186.2
148.4
67.1
10.3
21.0
3.0
3.16
2.2
14.4
11.9
9.3
18.7
FY13(a)
1229.0
179.0
147.5
1.3
143.0
110.3
51.0
13.5
26.0
3.8
2.60
2.7
14.6
11.9
9.0
21.3
FY12(a)
804.0
130.7
108.1
0.5
107.2
83.9
39.0
17.7
14.0
2.0
2.15
3.2
16.3
13.4
10.4
18.1
FY11(a)
694.8
120.0
98.2
0.1
96.6
77.2
36.0
19.1
12.0
1.7
2.07
3.3
17.3
14.1
11.1
17.2
The opinion and information contained herein are based on available data believed to be reliable and this report is provided for information purposes only. It is not to be construed as
an offer, invitation to buy or sell the securities mentioned herein. Jupiter Securities Sdn Bhd does not warrant the accuracy stated in any manner herein and no reliance upon such
things by anyone should give rise to any claim whatsoever. The directors and staff of Jupiter Securities Sdn Bhd may have an interest in the securities mentioned.
JUPITER SECURITIES SDN BHD
JUPITER SECURITIES RESEARCH
Table 3. Balance Sheet
Balance Sheet (RM'm)
Current assets
Cash
Stocks
Debtors / Receivables
Total Current assets
JulFY16(f)
JulFY15(f)
JulFY14(a)
JulFY13(a)
JulFY12(a)
102.8
250.0
350.0
702.8
80.4
220.0
350.0
650.4
87.5
213.6
243.5
544.6
110.3
149.2
195.4
454.9
36.3
132.1
127.4
295.6
Current Liabilities
Short term loans
Creditors / Payables
Tax
Total Current liabilities
350.0
300.0
18.0
668.0
350.0
250.0
15.0
615.0
262.9
272.1
11.5
546.5
167.6
258.9
10.4
436.9
50.7
155.9
6.5
213.1
Net Current Assets
34.8
35.4
-1.9
18.0
82.5
Long term assets
Land for property dev.
Plant & machinery
Investments
Total Long term assets
447.0
710.2
38.8
1196.0
497.0
608.2
38.8
1144.0
264.9
552.1
38.8
855.8
254.8
495.8
38.9
789.5
356
119.7
37.6
513.3
LT assets + net current assets
1230.8
1179.4
853.9
807.5
595.8
Shareholders funds
Paid up capital
Earnings & other reserves
Total shareholder funds
115.0
813.8
928.8
115.0
699.4
814.4
115.0
597.7
712.7
115
471.7
586.7
115.0
370.2
485.2
Minority Interest
52.0
45.0
22.7
20.0
34.0
Long term liabilities
250.0
320.0
118.5
200.8
36.2
Total equity & liabilities
1230.8
1179.4
853.9
807.5
595.8
Dividend is assumed fully paid out by end of financial year.
Recent announcement of proposed land purchase has been included, and consequently debt has increased.
The opinion and information contained herein are based on available data believed to be reliable and this report is provided for information purposes only. It is not to be construed as
an offer, invitation to buy or sell the securities mentioned herein. Jupiter Securities Sdn Bhd does not warrant the accuracy stated in any manner herein and no reliance upon such
things by anyone should give rise to any claim whatsoever. The directors and staff of Jupiter Securities Sdn Bhd may have an interest in the securities mentioned.
JUPITER SECURITIES SDN BHD