MANUFACTURING and property company Scientex Bhd has received a mixed review from a local research house.

“We recently met with the management of Scientex and came back with a mixed outlook on its overall prospects,” according to BIMB Securities Sdn Bhd (BIMB Research) in a note released on Feb 16.

In the note, BIMB Research retained a ‘Hold’ call for Scientex’s shares with a 52-week target price (TP) of RM3.89. The counter closed at RM3.91 last Friday.

From the eight research houses that trail the company, as captured by Bloomberg, it had three ‘Buy’, four ‘Hold’ and one ‘Sell’ calls. The consensus TP was RM4.01.

In its report, BIMB Research said it believed Scientex’s earnings growth prospects remained encouraging, driven by growth in the property segment leveraging on steady demand for affordable housing.

However, it said it exercised caution in the packaging segment due to weaker demand that resulted in subdued utilisation rate (UR) of 55%-60% in the intermediate term.

“Scientex also serves as a proxy for the recyclable plastics sector, aligning with heightened environmental, social and governance (ESG) concerns by actively promoting ecofriendly products and contributing to a more sustainable and responsible approach within the industry,” it said.

On the property segment, the report said it remained in favour of Scientex for its strong position as an affordable housing developer with a robust brand name in Southern Peninsular Malaysia, particularly Johor, as well as its market presence in North Peninsular Malaysia.

The group has shared that its unbilled sales currently stood at RM1.5 billion and it expected property sales to exceed RM1.8 billion for 2024.

“We anticipate continued strong take-up for its project which targets the low to mid-income population in suburban areas, offering homes in the price range of RM250,000-RM500,000.

“The recent strategic land acquisitions in Kulai and Muar, Johor, reflect the group’s foresight in catering to the working population traveling to Singapore. Additionally, it also positions Scientex as a potential beneficiary of the Kuala Lumpur (KL)-Singapore HighSpeed Rail (HSR), with the prospect of a train station in Muar,” BIMB Research said.

The report noted that Scientex considered several factors when selecting land for acquisition, including strategic location, accessibility, population density and cost-effectiveness.

The group stated that land cost constitutes up to 20% of the gross development value (GDV) of the land.

Besides, Scientex typically targets agricultural land and converts it into residential land. The process usually takes about six to nine months. In addition, the first phase of the project is expected to be launched within one to one and a half years after the land acquisition, it added.

On the packaging segment, BIMB Research said the management shared that the UR of the segment was currently hovering between 55%-60% which was slightly higher than 50%-55% previously.

“It expects the UR to recover further to above the 60% threshold in the near term based on recent improvements in order volumes particularly from the consumer segment.

“Nonetheless, we are of the view that the outlook for packaging will remain challenging amid a soft global economy.

“Besides that, we anticipated that margins would experience compression given the potential for upward movements in resin prices coupled with the escalation of energy costs, therefore adding pressure on the segment’s profitability,” it said. — TMR / pic TMR FILE