Friday, 18 December 2015

Scientex: Expects FY16 Performance To "Normalise"?

Scientex FY16Q1 Financial Result

SCIENTEX (RM mil) FY16Q1 FY15Q4 FY15Q3 FY15Q2 FY15Q1
Revenue 550.6 452.5 455.3 462.9 431.1
Operating Profit 82.1 77.1 58.4 48.0 41.5
OP% 14.9 17.0 12.8 10.4 9.6
PBT 80.8 77.0 56.5 47.3 40.2
PBT% 14.7 17.0 12.4 10.2 9.3
PATAMI 60.9 48.9 42.9 36.1 30.3

Manu Rev 392.0 319.9 318.8 327.0 320.3
Manu OP 38.0 24.7 20.0 17.4 14.7
Prop Rev 158.6 132.6 136.5 135.9 110.8
Prop OP 47.5 61.6 41.5 40.3 32.0

Total Equity 1007.6 1004.8 851.6 808.6 769.8
Total Assets 1818.5 1637.8 1488.9 1533.3 1475.8
Trade Receivables 404.8 321.7 325.2 340.2 303.2
Inventories 110.1 112.0 85.9 81.3 83.7
Cash 79.7 90.6 63.5 121.7 102.9
Prop Dev Cost 139.8 136.5 110.5 117.0 104.0

Total Liabilities 744.8 633.0 593.7 681.4 664.7
Trade Payables 336.1 308.3 255.6 232.1 246.6
ST Borrowings 253.0 149.9 202.5 311.4 297.9
LT Borrowings 70.0 75.5 80.2 50.2 66.6

Net Cash Flow -10.9 6.9 -20.3 38.0 19.1
Operation 63.3 189.9 93.2 16.4 1.5
Depreciation 13.5 11.4 11.0 10.7 10.7
Investment -117.7 -37.2 -29.6 -4.0 13.2
PPE purchase 117.3 100.0 54.3 18.8 5.1
Financing 43.6 -145.8 -83.9 25.5 4.5
FCF -54.0 89.9 38.9 -2.4 -3.6

EPS 26.97 21.66 19.02 15.98 13.69
NAS 4.46 4.17 3.77 3.58 3.47
D/E Ratio 0.24 0.13 0.26 0.30 0.34

Scientex has released its latest FY16Q1 result which saw its PATAMI jumped by 100% YoY. It is yet another record high quarter in revenue and net profit by a wide margin.

The next day, The Edge website came out with this article:

After achieving its best ever financial result in FY16Q1, Scientex expects FY16 performance to "normalise".

I guess most people will straight away think that this FY16Q1 is extraordinary and non-sustainable, and it will fall back to its "normal" level in the rest of FY16.

Actually it is not, it is the other way round.

Scientex record-breaking FY15 was hit by forex loss and higher tax rate. In FY16, all these will "normalise", which means that it will have less forex loss & usual tax rate, which also means that if its sales in FY16 remain the same as in FY15, it will enjoy higher profit.

Will Scientex's FY16 sales stay the same as FY15?

Its new CPP plant (12,000MT p.a) is set to start commercial production by end-2015.

Its BOPP plant (60,000MT p.a) is 90% completed and is on track to commence operation by mid-2016.

Its 20% expansion in PE film to 74,400MT p.a is also set to be completed in mid-2016.

How much revenue can Scientex generate in its FY16? I thnik it will be more than FY15 even though those expansion may only make meaningful contribution from FY17 onward (from Aug16).

Nevertheless, net profit generated is hard to predict as there might be higher start up cost and also depreciation charge.

SGW Ipoh (Mondi) which was acquired in Aug15 contributed about RM40mil in revenue in this quarter.

Without contribution of SGW Ipoh, its manufacturing revenue and profit will still hit a record high.

It will benefit from strong USD as 70% of its products are exported.

Property division continue to do well, despite lower profit QoQ as there was a revaluation gain of RM12.6mil in previous quarter.

Unbilled sales increased to RM632.2mil at the end of FY16Q1, compared to RM585mil 3 months ago.

Scientex's CEO said that the company will allocate as much as RM460mil for capex in FY16, which include RM200mil for property division.

For comparison, the company just spent RM100mil on PPE purchase in FY15.

In the first quarter of FY16, RM117mil has already been spent for PPE purchase, which include about RM54mil in the acquisition of SGW (Mondi) Ipoh.

It has plan to expand the capacity of SGW Ipoh later in 2016, and will continue to grow its packaging division by acquisition.

Of course its cash flow is "poor" temporarily due to the aggressive expansion, and its net gearing ratio has increased to 0.24.

The CEO mentioned in The Edge that FY16 will see BETTER RESULTS and BETTER OPERATING CASH FLOW.

Its operating cash flow in FY15 was approximately RM200mil.

After the announcement of latest result, Scientex's share price surged from RM8.60 to RM9.50 in 2 days time.

Is Scientex "expensive" now?

Personally I think it is not unfair to annualise its FY16Q1 EPS of 27sen, don't you think so?


  1. there is stil lot of up size for this counter. by the way, QoQ profit lower because 12.6m fair value gain from investment property last quater. i am impress the performance of property in this season and surprise the decent increase in unbill sales.

    1. Thanks for the reminder, I wrote this post in a hurry and missed it. I'll add it in.

  2. how to calculate unbilled sales? Any part in the qtr results show that?

    1. Hi, I got this unbilled sales figure from Scientex quarterly result presentation slides in its website.

  3. Looking at the price of the O&G counters today, it is so tempting to buy..
    I am eyeing SKPetro, Deleum and Dayang apart from Coastal. I think I can get lower price if I wait longer..
    Another depressed industry now is steel industry. Ann Joo's stock price now is lower than early 2009, and P/B is merely 0.3x..
    Export oriented counters are getting hotter and hotter now, so I suppose I have to take a look at other industries. Are you looking at any other industry too ?

    1. Actually I don't have any particular industry to look into at the moment. Just looking for undervalued and/or growth stocks. I try to avoid too many export stocks in my portfolio but might still add some if price is attractive. I'm re-studying some plantation stocks, and I will stay away from O&G first.

  4. Wow! Geshen's stock price shot up again this morning. It has risen too fast, I think.
    I have some Geshen's shares too (switched from LCTH to Geshen after reading your article, tq :)). I am wondering should I sell some now.. if I use the latest Q's core profit to annulise and give it a PE of 10, the fair valur would be RM2.6x. If that is the case, it is considered overvalue now. But, is PE=10 a fair PE for Geshen ? or is the latest Q's profit sustainable ? I am not sure..
    I also remember what cold eyes has said before :"it is difficult to find good company, so don't sell if it is just overvalued, but only sell if it is excessively overvalued. For example, if the fair valur we think is RM5, don't sell at RM6, but if it is risen to RM10, sell!".
    This hints that I should not sell Geshen at this price yet..?
    Can I know your opinion ? Do you think Geshen's price shot up too fast ?

    1. Definitely Geshen share price movement exceeded my expectation, I think mainly it is recommended by some renowned investors. So it is at risk of falling sharply when result does not meet expectation later, just like HHgroup & Johotin.

      I feel like Polyplas is expanding and may give some positive surprise. So I don't have plan to sell at the moment. But I can't rule out selling some in the near future if its share price continue to go up, for example towards RM3.50. If not sure, I think it's not wrong to sell some.

      Personally I don't classify Geshen as "good company" yet which I can hold really long term like Scientex, Globetronic etc. We shall see what happen next.

    2. Thanks for sharing your opinion :)

  5. How come u would hv known Jadi is experiencing Rev growth, despite the demand for the toner continue To be weak