October 3, 2016, Monday
KUCHING: Scientex Bhd’s (Scientex) financial year 2017 (FY17) earnings outlook has been viewed as promising, following a results briefing at the newly constructed biaxially oriented polypropylene (BOPP) plant in Pulau Indah.
According to RHB Research Institute Sdn Bhd (RHB Research), Scientex’s highly anticipated BOPP film plant, which would raise capacity ten-fold to 60,000 tonnes, come into operation in September.
“The new plant was part of a strategic alliance with Futamura to employ advanced Japanese film-manufacturing technology to produce high-quality BOPP films.
“As we understand, the BOPP film supply landscape in Malaysia presents promising market potential for Scientex, as the bulk of local demand for BOPP film is currently imported.
“Secondly, its state-of-the art BOPP facility would allow cost-efficiencies to ensure price competitiveness, while offering high quality films that local competition may lack,” the research house said.
On Scientex’s property division, RHB Research noted that new property sales rose a solid 30.8 per cent year on year (y-o-y) to RM794 million in financial year 2016 (FY16) (July).
“Management has plans to launch projects worth about RM700 million in FY17, after achieving targeted launches of approximately RM650 million in FY16.
“Going forward, management plans to direct its focus on affordable housing below the RM500,000 per unit mark, where demand for housing remains resilient,” the research house said.
It added that unbilled sales stood at RM717.2 million in FY16, compared to RM584.9 million in FY15, and would provide earnings visibility for the next few years.
Meanwhile, the research arm of TA Securities Holdings Bhd (TA Research) highlighted that# for the property segment, the group is looking to complete the Meru land acquisition in September 2016 with maiden launch to be held in the second quarter of 2017 (2Q17).
“This will help to boost the sales of the group from these new projects over medium to longer term,” TA Research said.
TA Research noted that the group will be focusing on improving efficiencies by reducing costs and wastage.
The research arm further noted that this could be achieved through better planning and systematic execution of works, coupled with better cash flow management to lower the financing cost.
After imputing FY16 results, TA Research tweaked its FY17-FY19 earnings estimates slightly upwards by 1.8 per cent/-2.1 per cent/0.9 per cent to RM311.4 million/RM363.1 million/RM379.3 million respectively, following some changes in key assumptions (which are revenue and operating expenditure (opex).
All in, TA Research maintained ‘buy’ on the stock.
On the other hand, RHB Research kept its FY17 to FY18F earnings relatively unchanged and introduced its FY19 projection.
It also maintained ‘buy’ on attractive valuations and exciting growth plans in Scientex’s manufacturing segment.