Scientex counter downgraded to ‘Hold’ after share price increase


SCIENTEX Bhd counter has been downgraded to a ‘hold’ from a ‘sell’ at Affin Hwang Investment Bank Bhd (AHIB), with an unchanged 52-week target price of RM3.95, as its share price has increased more than 13% since the research house’s last note in June.

The update follows the company’s filing yesterday for its fourth quarter ended July 31, 2023 (4Q23), with its net profit down 8.1% to RM124.98 million compared to the previous year, on the back of RM1.07 billion in turnover.

Scientex stood at RM3.69 at 12.30pm today (Sept 21), valuing the company at RM5.72 billion. Its 52-week high was RM3.97 and its 52-week low at RM3.16.

Scientex shares have four ‘Buy’, three ‘Hold’ and one ‘Sell’ calls, with a 12-month consensus target price of RM4.01, promising a return potential of 8.4%.

In its exchange filing, Scientex attributed the net profit decline primarily to increased operating costs, particularly higher energy expenses, and a goodwill impairment of RM22.7 million related to its Myanmar operations.

For the full financial year ended July 31, 2023 (FY23), Scientex’s net profit increased by 6.9% to RM438.14 million, driven by the robust performance of its property division.

In a another research note, BIMB Securities has maintained a ‘Buy’ call on Scientex with a target price of RM4.15, up from RM3.68.

BIMB said it foresees a rebound in the packaging segment and remains confident in strong earnings from the property segment, driven by new projects and robust uptake.

Overall, BIMB expects sustainable earnings for Scientex, driven by strategic expansion, steady consumer demand, favourable contracts, and growth in their packaging segment.

“We also foresee resilient demand for their affordable houses, supported by upcoming launches in various states across Peninsular Malaysia, as well as efforts to acquire competitively priced land in strategic locations to address rising operational costs,” it said.

BIMB likes Scientex due to its organic expansion and M&A activities for potential long-term growth, strong position as an affordable housing developer, and high commitment to sustainability and the environment in their plastic product offerings.

In a separate report, Kenanga Research has maintained an ‘Underperform’ call at Scientex by raising their TP by 8% to RM3.23 (from RM2.99).

Kenanga Research said Scientex anticipates higher property sales in FY24 as they continue to see robust demand for its newly launched affordable homes in Peninsular Malaysia.

It said the recent land acquisitions in Jenjarom, Selangor, as well as Tebrau and Kulai in Johor, are expected to be completed in FY24, which will contribute to improved performance in the near future.

Kenanga Research aligns with this optimistic outlook for its property segment, primarily due to the impressive take-up rate of over 80% for its new affordable housing launches.