Scientex: On-going Expansion In Manufacturing & Property

Scientex FY15Q3 Financial Result

SCIENTEX	FY15Q3	FY15Q2	FY15Q1	FY14Q4	FY14Q3
Revenue	455.3	462.9	431.1	415.4	426.8
PBT	56.5	47.3	40.2	56.0	48.1
PBT%	12.4	10.2	9.3	13.5	11.3
PATAMI	42.9	36.1	30.3	48.8	37.2
Manu Rev	318.8	327.0	320.3	297.3	317.2
Manu OP	20.0	17.4	14.7	18.8	16.4
Prop Rev	136.5	135.9	110.8	118.1	109.6
Prop OP	41.5	40.3	32.0	36.9	32.5
Total Equity	851.6	808.6	769.8	712.7	686.2
Total Assets	1488.9	1533.3	1475.8	1400.4	1333.2
Trade Receivables	325.2	340.2	303.2	243.5	274.8
Inventories	85.9	81.3	83.7	109.0	82.1
Cash	63.5	121.7	102.9	83.8	56.4
Prop Dev Cost	110.5	117.0	104.0	104.6	71.8
Total Liabilities	593.7	681.4	664.7	665.0	624.9
Trade Payables	255.6	232.1	246.6	272.1	238.9
ST Borrowings	202.5	311.4	297.9	262.9	179.1
LT Borrowings	80.2	50.2	66.6	77.5	156.2
Net Cash Flow	-20.3	38.0	19.1	-68.4	-95.8
Operation	93.2	16.4	1.5	153.5	89.5
Investment	-29.6	-4.0	13.2	-149.2	-106.7
Financing	-83.9	25.5	4.5	-72.7	-78.6
Dividend paid	47.1	17.7	17.7	57.5	57.5
EPS	19.02	15.98	13.69	22.09	16.43
NAS	3.77	3.58	3.47	3.22	3.10
D/E Ratio	0.26	0.30	0.34	0.36	0.41

In FY15Q3, Scientex's revenue drops 1.6% compared to preceding quarter of FY15Q2 but PBT increases by 19.5%.

This is mainly due to reduction in forex loss from RM9.7mil to RM3.1mil in the same period, besides better profit margin in its consumer packaging segment.

As a measure to reduce exposure to risk of weakening Ringgit against USD, borrowing (mainly USD-denominated) has been pared down by 20% in the last quarter.

An interim dividend of 9sen was declared. It is 1sen higher than previous year.

For its manufacturing arm, new CPP and BOPP plants are on track to start operation by end-2015 and mid-2016 respectively.

Once completed, BOPP film capacity will increase 10-fold from current 6k MT pa to 60k MT pa.

There is also a further expansion of its PE film capacity from current 48k MT pa to 60k MT pa, targeted to be completed by mid-2016.

PE film has just completed the first round of expansion in end-2014 from 24k to 48k MT pa.

It will install a new 10-colour printing machine in July-2015 to increase sales of more value-added products.

      BOPP film - very commonly used in consumer packaging

Scientex's property arm is equally exciting. It will acquire 326 acres of land in Mukim Pulai, Johor Bahru for RM219mil. This translates into RM15.41psf which I think is quite attractive.

The land is located close to its existing Taman Mutiara Mas and adjacent to Huayang's Taman Pulai Indah township.

This new acquisition will increase its ongoing/undeveloped landbank from 870 acres to 1200 acres.

Even though borrowings will certainly jump after the acquisition, I'm still happy that Scientex can replenish its landbank especially with such a sizable one.

The land size of 326 acres is smaller than Huayang's Pulai Indah at 477 acres.

Scientex has 7 new launches in 9MFY15 (til Apr15) worth RM359mil which comprises 65% of affordable housing. 

This means that it just launched one new project worth RM83mil in Q3 of FY15.

Thus, latest unbilled sales drop from RM640mil a quarter ago to RM599mil.

Scientex will build 1,420 units of affordable houses under Johor Affordable Housing Scheme, in which first phase 718 unit has been launched in May15. The selling price is just RM80k-150k.

       Location of newly acquired land in Pulai

With sluggish property market, I don't expect Scientex to grow impressively in FY15.

Hopefully the performance of its property segment can at least maintained at current level so that when expansion of its manufacturing segment is completed, Scientex can enjoy remarkable growth from 2016-17.

I feel that Scientex has a great management team. Though its share price movement is not that exciting compared to others, my plan is still to hold for really long term.