SCIENTEX (#2)

Update on 1QFY2011 Result

·         Although revenue q-o-q dropped slightly to 186.63 m from 191.69 m in 4QFY2010 (-2.64%), it recorded a 13.17% increase from the same quarter in 2010. 

·         Within our expectation, the first quarter always has a lower sale value compared with the fourth quarter but overall it is in a rising trend as shown below.  

·         In line with revenue, PBT y-o-y surged 43%. This is mainly due to lower interest expense and higher investing results. However, a higher tax amount caused PAT y-o-y only recorded a 32% increase.

·         Y-o-y, EPS leaped higher  from 5.91 sen to 7.89 sen, representing a 33.5% increase.

·         Reserves increased by 18.444 m. Largely came from the current asset includes receivables, derivative financial assets and cash and bank balances whilst total borrowings decreased by 6.37 m.

·         Gearing improved from 0.11x (July 2010) to 0.08x (October 2010). (net of cash)

·         ROE & ROA improved.

·         There is no dividend policy but the company said that they will try to distribute 30% on average based on performance basis.

Highlights

Packaging Industries

·         Stretch film and pp strapping band are the major contribution among the manufacturing lines to the top line, which contributed 55% and 10% respectively.

·         Stretch film’s capacity has been growing since 1998 from 8k MT p.a to currently 100k MT p.a, which has a total of 8 production lines. The company will continue to expand its capacity by adding another RM 18 mil CAPEX for FY2011. (This CAPEX includes the expansion on strapping band as well). According to the company, capacity of stretch film will increase to 120k MT p.a. in FY2011. The expansion will help the company to aim for becoming one of the top 5 producers of stretch film where it is currently the only Asia Company in the top 10 stretch film producers among the world competitors.

·         Strapping bands has a capacity of 16.2k MT p.a with 10 production lines. The company will expand its strapping band capacity to 24k MT p.a in FY2013.

·         95% of both stretch film and strapping band are exported to foreign countries.

·         I’ll not cover the other packaging products as I do not think it will bring any significant changes to the top line.

Property division

·         Current  project in hand of RM418mil

·         Pipeline projects of RM1.8mil last until 2018

·         Total GDV – Completed GDV – On-going GDV = RM1.8 b.

·         RM1.8b divided by on-going GDV RM418 m = 4.3 years                                                                                                                                                                                                                                                                                                        

My View

 

	RM '000
	Manufacturing	Property	Assumption
Asset	214.35		PAT 25.16 *Ave. P/E 8.5x
		351.37	Remains the same
Total Value		565.72
Net Debt		32.96
Equity Value		532.76
Share m		230.00
Value of Share		2.32	~13% upside (Last price RM2.05 as at 20 Dec 2010)

 

Disclaimer: The company analysis that appear in this blog is merely facts gathered from different sources and the author's personal view. It is not a buy or sell recommendation. The author do not guarantee the accuracy of the facts being presented. Please consult your investment advisors before acting on any information provided by the analysis above.