Analysts raise target prices for Scientex on robust property demand

• TA Securities said Scientex’s property segment saw a strong take-up rate of 85% in FY2023, indicating robust demand for its properties, following launches with a gross development value (GDV) of RM2.1 billion.

KUALA LUMPUR (Sept 21): Analysts have raised their target prices (TPs) for Scientex Bhd after its financial results for the year ended July 31, 2023 (FY2023) met expectations, and as they are more bullish on the company’s property segment due to the stable interest rate environment.

TA Securities said Scientex’s property segment saw a strong take-up rate of 85% in FY2023, indicating robust demand for its properties, following launches with a gross development value (GDV) of RM2.1 billion.

The research house raised its earnings forecasts for Scientex by 3.2% for FY2024 and 5.1% for FY2025, and its TP to RM3.95 from RM3.77 previously.

“In FY2024, the company is set to launch affordable housing projects with a GDV of RM2.6 billion, amid expansion of its land bank with capital expenditure allocations of RM1 billion,” TA Securities wrote in a note.

The global packaging manufacturer and property developer posted a 6.9% increase in net profit to RM438.14 million for FY2023, from RM409.87 million a year earlier, while revenue expanded 2.3% to RM4.08 billion from RM3.99 billion for FY2022.

However, the projected total return of 10.7% for the coming year falls below the required rate of return threshold (5%), causing the research house to downgrade the stock to "hold" (from "buy").

RHB Investment Bank Bhd also downgraded its call on the stock to "neutral", but upgraded its TP to RM3.85 from RM3.80, having fine-tuned the revised net asset value to reflect the company’s latest property-related figures.

“Scientex’s valuation is now fair, with the stock trading at its historical price-earnings (P/E) mean. We also incorporate a 0% environmental, social and governance (ESG) premium/discount to our TP, given its ESG score of 3.0,” said RHB.

Meanwhile, Kenanga Research viewed that demand for Scientex’s packaging products in the near term is constrained by the global economic slowdown. Additionally, it believes that the stock is currently trading at rich valuations.

“We raise our sum-of-parts-based TP by 8% to RM3.23 (from RM2.99), after we recalibrated our valuation of the property business. Our revised TP values the packaging business at an unchanged 12 times FY2024 P/E ratio, at a premium to the sector’s average forward P/E ratio of 10 times to reflect its size, being one of the largest players in the region,” said Kenanga, which maintained its "underperform" call on the stock.

At the time of writing on Thursday, Scientex shares were trading up three sen or 0.82% at RM3.71, translating into a market capitalisation of RM5.75 billion.

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