Analysts maintain positive stance on Scientex after solid FY2024

• BIMB favours Scientex for its organic expansion and merger and acquisition activities for potential long-term growth, strong position as an affordable housing developer, and high commitment to sustainability and the environment through its plastic product offerings.

KUALA LUMPUR (Sept 25): Analysts have maintained their positive stance on Scientex Bhd (KL:SCIENTX) after the group's core earnings came mostly within expectations for the financial year ended July 31, 2024 (FY2024).

Scientex's FY2024 core profit after tax and minority interest of RM535.7 million was in line with BIMB Securities' forecast at 100.1% and market expectations at 97.2%, according to the research house in a note on Wednesday. 

“We make no changes to our FY2025-FY2026 earnings assumptions, despite the challenging performance of Scientex's packaging division,” BIMB said. 

“We believe the company's overall performance will be [boosted] by consistent and robust demand for affordable housing,” the house added. 

BIMB favours Scientex for its organic expansion and merger and acquisition activities for potential long-term growth, strong position as an affordable housing developer, and high commitment to sustainability and the environment through its plastic product offerings, the house said. 

BIMB concluded that Scientex's 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.

BIMB maintained its 'hold' call on Scientex, with a higher target price (TP) of RM4.50 (from RM4.15 previously).

Meanwhile, after inputting the FY2024 figures, TA Securities revised up its core earnings forecasts by 0.2% for FY2025 and 3.1% for FY2026.

TA Securities also expects demand for the packaging sector to remain soft, particularly in consumer packaging. 

This is mainly due to pricing competition from China players, which are offering lower prices, it said. Notably, the sales mix of consumer and industrial packaging was evenly split for Scientex at approximately 50% in FY2024.  

TA Securities expects a gradual recovery in demand in FY2025, following an improvement in overall sales volume of around 4% year-on-year in FY2024, which offset a slight decline in average selling prices for Scientex.

The house remains positive on the company's outlook, driven by unbilled sales of RM1.8 billion for FY2025, a potential gross development value of RM50 billion from its total land bank, and an 80% take-up rate for launches in FY2025. Thus, the house anticipates a resilient earnings before interest and tax margin of 30.8% for FY2025 (versus 27.6% in FY2024 for the company).

TA Securities maintained its 'buy' call on Scientex, with a revised TP of RM5.48 (from RM5.41), based on sum-of-parts valuation. 

At the time of writing on Wednesday, Scientex shares were unchanged at RM4.19, with a market capitalisation of RM6.5 billion.

Looking to buy a home? Sign up for EdgeProp START and get exclusive rewards and vouchers for ANY home purchase in Malaysia (primary or subsale)!