Affin Hwang keeps ‘buy’ call on Scientex, TP at RM10.50

KUALA LUMPUR: Affin Hwang Capital research maintained its buy rating on Scientex Bhd with an unchanged target price of RM10.50 following the release of the latter’s 1QFY20 earnings results.

According to the research house, Scientex’s core net profit of RM83mil, which was 45% higher year-on-year, came within its and market forecasts as it expects stronger property billings and higher production volumes in the coming quarter.

The improved performance was owing to higher revenue and a higher EBITDA margin.

“Notably, manufacturing segment EBIT rose by 55% yoy to RM55m, driven by continued demand from export (+9% yoy) and domestic markets (+27% yoy; also partly lifted by subsidiary Daibochi’s contribution).

“Elsewhere, the property segment’s EBIT expanded by 58% to RM63m from the steady progress billing recognised for its development projects,” it said.

Affin Hwang noted that Scientex is currently focusing on ramping up its utilisation rate with a target of at least 70% in FY20E as compared to 65% in 1QFY20.

This will be driven by its BOPP plant and Arizona plants and through higher process automation at its plants.

It added that Scientex has made further inroads into the US market, via the acquisition of stretch film plants in Lancaster, South Carolina State, Eastern USA.

Source: TheStar