FPP manufacturing, new property launches to fuel Scientex’s growth
17 Sep 2020
Scientex Bhd’s net profit is expected to grow by 15 per cent, 22 per cent and 13 per cent in the financial year ending July 31, 2020-2022 (FY20-) FY22) respectively, according to AmInvestment Bank Bhd.
AmInvest analyst Jeremie Yap said the projection would be driven by the growth in fast-moving consumer good (FMCG) and flexible plastic packaging (FPP) segments.
However, Yap said Scientex could record a weaker fourth quarter FY20 financial results, impacted by the Covid-19 outbreak as its property division was not allowed to operate due to the Movement Control Order (MCO).
“We expect a V-shaped recovery in subsequent quarters for the division due to pent-up demand for affordable housing in the local property sector,” he said in a report today.
Yap said Scientex group’s FPP manufacturing continued to operate during the MCO as the business was classified under “essential services”.
“We believe Scientex will be able to maintain its gross profit margins as the group operates on a cost- pass through business model for most of their large clients.”
He said this was a common business practice in the plastics and packaging industry in both the industrial stretch film and consumer packaging sectors.
“With that, we are not too concerned about the movement of resin prices as we do not expect fluctuations to impact the group’s profitability.”
The firm said Scientex’s growth prospects would supported by demand for more plastic and packaging materials with the bright outlooks for both the e-commerce and the food and beverage (F&B) sector.
Scientex supplies to diverse sectors such as industrials and consumer-based products in F&B and FMCG sectors.
“It is one of the top three producers of industrial stretch film in the world (with an estimated global market share of about 5.0 per cent) and a significant player in the FPP market in Asia-Pacific (with an estimated market share of 2.0 per cent in the region).
“It is also a property developer focusing on affordable housing in Malaysia with an outstanding gross development value of RM12.8 billion,” AmInvest said.
The firm has initiated coverage on Scientex with a “buy” call with a fair value of RM10.74 in anticipation of growing faster than its peers.
“Scientex’s earnings growth will be underpinned by its FPP manufacturing (which will in turn be driven by growth in key markets such as F&B, FMCG) and new property launches.”
Source: NST Posted on : 17 September 2020