Tuesday, 6 October 2015

Scientex: Another Record Year In FY15

Scientex FY15Q4 Financial Result

Revenue 452.5 455.3 462.9 431.1 415.4
Operating Profit 77.1 58.4 48.0 41.5 56.2
OP% 17.0 12.8 10.4 9.6 13.5
PBT 77.0 56.5 47.3 40.2 56.0
PBT% 17.0 12.4 10.2 9.3 13.5
PATAMI 48.9 42.9 36.1 30.3 48.8

Manu Rev 319.9 318.8 327.0 320.3 297.3
Manu OP 24.7 20.0 17.4 14.7 18.8
Prop Rev 132.6 136.5 135.9 110.8 118.1
Prop OP 61.6 41.5 40.3 32.0 36.9

Total Equity 1004.8 851.6 808.6 769.8 712.7
Total Assets 1637.8 1488.9 1533.3 1475.8 1400.4
Trade Receivables 321.7 325.2 340.2 303.2 243.5
Inventories 112.0 85.9 81.3 83.7 109.0
Cash 90.6 63.5 121.7 102.9 83.8
Prop Dev Cost 136.5 110.5 117.0 104.0 104.6

Total Liabilities 633.0 593.7 681.4 664.7 665.0
Trade Payables 308.3 255.6 232.1 246.6 272.1
ST Borrowings 149.9 202.5 311.4 297.9 262.9
LT Borrowings 75.5 80.2 50.2 66.6 77.5

Net Cash Flow 6.9 -20.3 38.0 19.1 -68.4
Operation 189.9 93.2 16.4 1.5 153.5
Investment -37.2 -29.6 -4.0 13.2 -149.2
Financing -145.8 -83.9 25.5 4.5 -72.7

Dividend paid 47.1 47.1 17.7 17.7 57.5

EPS 21.66 19.02 15.98 13.69 22.09
NAS 4.17 3.77 3.58 3.47 3.22
D/E Ratio 0.13 0.26 0.30 0.34 0.36

Scienex's FY15Q4's revenue is lower by RM2.8mil QoQ but PATAMI is higher by RM6.0mil. There is a pre-tax revaluation gain of RM12.6mil and a net forex loss of RM7.3mil in this quarter.

Current quarter's tax rate is abnormally high at 35.3% due to timing of deferred tax recognition. If given normal tax rate, its PATAMI in FY15Q4 should reach RM57mil.

For the whole FY15, revenue increases 13.3% to RM1.80bil while PATAMI inches up 6.5% to RM158.2mil.

This result includes a revaluation gain of RM12.6mil as mentioned earlier in its property segment, as well as a forex loss of RM27.2mil in its manufacturing segment.

Its balance sheet remain clean with a net debt/equity ratio of just 0.13 while cash flow from operation is nothing but excellent.

Revenue 1801.7 1590.5 1229.0 881.0 804.0 694.8
Revenue growth % 13.3 29.4 39.5 9.6 15.7
PBT 221.0 182.3 143.0 107.2 96.6 70.8
PBT% 12.3 11.5 11.6 12.2 12.0 10.2
PATAMI 158.2 148.5 110.3 83.9 77.2 60.3
PATAMI growth % 6.5 34.6 31.4 8.7 28.0

EPS 70.43 67.12 51.00 39.00 35.90 28.00
NTA 4.17 3.22 2.84 2.44 2.17 1.92
ROE 15.7 20.8 17.5 16.0 16.5 14.6
DPS            22.0 21.0 26.0 14.0 12.0 9.0

The massive realized forex loss in FY15 is due to extensive pare down of its USD denominated loans by 80% to RM55.9mil, from RM280mil a year ago.

The bar chart below shows quarterly net forex loss realized by Scientex in FY2015.

This net forex loss of RM22.3mil is not a small amount. It is higher than whole year PATAMI of Prolexus in FY15 for example.

Apart from those exceptional gain & loss, Scientex's business is growing well to another record high in FY15.

Revenue from manufacturing segment grows 8.4% from RM1.19bil in FY14 to RM1.29bil, while operating profit increases 18% from RM64.9mil to RM76.8mil.

Its gross and EBITDA margin has improved compared to last financial year.

Revenue from property segment rises 29.5% from RM398mil to RM516mil, while operating profit jumps 45% from RM120.9mil to RM175.4mil which include a RM12.6mil revaluation gain.

Looking forward, Scientex's manufacturing segment especially its consumer packaging division is expected to grow by leaps and bounds in the next two FYs.

Its CPP film plant has been completed in Aug15 and is on track to start production by end of CY2015.

Further expansion of PE film annual capacity by 12,000MT (additional 3 lines) and the new BOPP film plant in Pulau Indah are expected to start running in mid-2016.

Besides, Scientex has acquired Mondi Ipoh in Aug15 which has annual capacity of 14,400MT for RM58mil.

Mondi Ipoh exports 70% of its products which include bakery bags, hygiene products packaging, form-fill-seal bags etc.

          Form-fill-seal machine

Net profit of Mondi Ipoh in 2014 is just RM0.14mil but there is a one-off gratuity payment of RM2.7mil.

Anyway, more importantly this acquisition will widen Scientex's product range and customers.

With all these expansion plans on track, the average monthly sales of its consumer packaging products is expected to jump by 3x in 2 years time.

In contrary, its property segment is expected to face some headwinds due to sluggish property market.

Overall property sales in FY15 is RM606mil according to RHB but Kenanga reported it as RM515.7mil. I'm not sure who is correct.

Anyway, these 2 figures are still higher than FY14 property sales of RM470mil.

Unbilled sales stood at RM585mil at end of Jul15, down slightly from RM599mil a quarter ago but still higher than RM537mil a year ago. Unbilled sales has increased to RM620mil in Aug15.

Scientex plans to launch RM600mil worth of property in its FY16 in which most of them are in affordable range less than RM500k.

It is also in the process to acquire 326 acres of land in Pulai for RM219mil.

Meanwhile, Futamura Chemicals Co. (FCC) has exercised its option to acquire another 5% shares in Scientex Great Wall (SGW) in Jul15 for RM40mil.

FCC currently holds 10% shares in SGW and has an option to acquire 20% of SGW. All of Scientex's consumer packaging businesses are incorporated under SGW. I do hope that FCC will stop here but I think it is unlikely.

Scientex has declared a final dividend of 13sen making it total 22sen with 31.4% payout in FY15. This represents a yield of 3% at share price of RM7.40.

At FY15 EPS of 70.43, Scientex is currently traded at actual PE ratio of 10.5x.

This EPS of 70.43 is not core profit of Scientex. Though most analysts give a core profit which is lower than its PATAMI of RM158.2mil, I think otherwise as I will only simply take into account the revaluation gain (RM12.6mil) and forex loss (RM27.2mil).

As the BOPP film plant will only be completed in mid 2016 which might be delayed, and its property segment might experience negative growth, I will be happy if its FY16 results match FY15.

I do expect a slight growth though due to expected lower forex loss in FY16, even though new facilities will incur higher depreciation charge.

I have hold Scientex for 2 years now and its share price has appreciated by 36%. This is actually not good enough compared to many other stocks which have doubled or tripled in this period of time.

Anyway, there is no doubt that Scientex is a great company to hold for long term.


  1. Come on, you holding the right company with a great discount previously. Keep it up, do more home work and if you think your have better than this one in Malaysia bursa, sell this business off and pursue with the better you can replace. No right or wrong, just business.

    1. At this point of time I still think that Scientex is the company that I will hold longest. I will try to add more shares if opportunity arise.

  2. Nowadays affordable homes doesnt mean value buy, it juz another name for low value houses, whereby constructor anything can save than save. And then u hv to stay with alot of low value people, this is the most shitty deal, ur kids can nvr stay focus on study, and easy to learn bad.

    1. Affordable houses will have low cost, low-medium, medium cost. I agree that quality for low cost is really bad. Anyway, I feel that Scientex will build decent quality low cost houses :)

  3. Hi BD,

    What do you think about CAN-ONE ? It 's EPS growth rate for 5 years is 15.49%. Net profit margin is 10%. However the DE is high at 0.8. The current PE is very attractive at 6.5.


    1. It's a complicated company to me. Its court cases and high debts give me doubts, though it has very low PE. I'm not sure what is its future plan or is there any plan to grow its business. It does look attractive anyway.

  4. Hi BD,

    Yeah agree with your opinion. The reason why I am interested in Can-one because I have 35% of my portfolio with Johortin @RM1.54. Recently Johotin price up to RM1.99 as of today. That is the reason which trigger my interest to look at it 's peer : Can-one.

    I bought Johortin because of your article.


    1. Good to you. My Johotin is just <10% of my portfolio. You must have high confidence on it :)