Thursday 18 December 2014

Scientex: Lower Margin In Packaging

Scientex FY15Q1 Financial Result

SCIENTEX FY15Q1 FY14Q4 FY14Q3 FY14Q2 FY14Q1
Revenue 431.1 415.4 426.8 383.5 364.8
PBT 40.2 56.0 48.1 44.4 37.8
PBT% 9.3 13.5 11.3 11.6 10.4
PATAMI 30.3 48.8 37.2 33.9 29.3






Manu Rev 320.3 297.3 317.2 288.5 289.2
Manu OP 14.7 18.8 16.4 15.9 17.7
Prop Rev 110.8 118.1 109.6 95.0 75.6
Prop OP 32.0 36.9 32.5 29.3 22.2






Total Equity 769.8 712.7 686.2 649.9 635.9
Total Assets 1475.8 1400.4 1333.2 1304.4 1263.1
Trade Receivables 303.2 243.5 274.8 251.7 209.7
Inventories 83.7 109.0 82.1 76.3 86.0
Cash 102.9 83.8 56.4 89.3 91.2
Prop Dev Cost 104.0 104.6 71.8 74.4 57.5






Total Liabilities 664.7 665.0 624.9 633.3 606.8
Trade Payables 246.6 272.1 238.9 214.2 229.4
ST Borrowings 297.9 262.9 179.1 205.8 167.9
LT Borrowings 66.6 77.5 156.2 163.7 164.3






Net Cash Flow 19.1 -68.4 -95.8 -62.9 -61.0
Operation 1.5 153.5 89.5 30.9 13.5
Investment 13.2 -149.2 -106.7 -67.0 -54.1
Financing 4.5 -72.7 -78.6 -26.8 -20.4






EPS 13.69 22.09 16.43 15.34 13.27
NAS 3.47 3.22 3.10 2.94 2.88
D/E Ratio 0.34 0.36 0.41 0.43 0.38


Scientex's FY15Q1 result is a bit disappointing to me. Though quarterly revenue hit all-time high at RM431.1mil, PBT margin drops significantly from 13.5% to 9.3% thus causing its PATAMI to fall 38% QoQ to RM30.3mil.

The fall in margin is mainly due to products mix in its manufacturing segment.

However, there is a provision for forex loss of RM5mil in this quarter from USD borrowings. If it is added back to PBT, its PBT margin will be 10.5%.

From analysts report, it is said that Scientex revised the pricing in its packaging arm to increase market penetration in Southeast Asia to fully utilize its new capacity.

Balance sheet does not change much with net debt/equity ratio drops slightly to 0.34.

Free cash flow in the next 2 years might not be that great as it plans to spend RM240mil for capex. The RM40mil share subscription by Futamura has already been included in the cash flow this quarter.




It will be a challenge for Scientex to break its FY14 profit record in FY15 as property sector is expected to slow down next year. 

Scientex's property division contributes as much as 68% to its operating profit in FY15Q1, and 64% in FY14.

I'm not sure how was its property sales in FY15Q1 and I can't find its latest unbilled sales as well.

It is expected to launch RM550-600mil worth of new properties in FY15.

Anyway, while I expect its property segment to be flat in FY15, what makes Scientex interesting is its expansion plan in its packaging business.




Scientex has just completed capacity expansion for its blown film, which includes the latest 9 layers barrier films.

Its Cast Polopropylene (CPP) film plant with expanded capacity of 12,000MT per annum should be able to commence operation by the end of 2015.

In the second half of year 2016, its new BOPP film plant should also be up and running. It will increase its BOPP film capacity 10x from 6,000MT to 60,000MT per year.

While it is acceptable to lower its margin to penetrate more markets, I do hope that its revenue will increase significantly to offset the damage caused by lower margin.

As Scientex used to have better second half, I will keep my target price at RM7.75 first.

Scientex is the only stock in my current portfolio that I am confident to hold for more than 10 years.

7 comments:

  1. wah wah wah hold more than 10 years ahh

    ReplyDelete
    Replies
    1. I do hope so :)
      But it doesn't mean that I will not sell early.

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  2. Like your post. How much will increase in bopp capacity give higher profit?

    ReplyDelete
    Replies
    1. Thanks. About the profit from new capacity, I think only professional analysts can tell.

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  3. Those who are looking for some informative post about 'Commodity' will surely find this post interesting, Epic research.

    ReplyDelete
  4. Replies
    1. You didn't sell all the shares? Anyway, i think share price gain in Scientex will be slow but steady.

      Delete