SCIENTX (4731) : Kenanga Research downgrades Scientex, TP slashed
KUALA LUMPUR: Kenanga Research has downgraded Scientex Bhd to Underperform from Outperform, slashing target price to RM5.49 from RM7.63 following first quarter results that were weaker than expected.
The plastic packaging manufacturer and property developer’s 1Q15 net profit of RM30.3mil was below expectations, making up only 17.9% of the research house’s full year forecast of RM169.7mil – already lower than consensus forecast of RM180.3mil.
Kenanga said it had lowered its forecast following the move by Scientex’s consumer packaging PE film segment to lower average selling prices (ASPs) in order to increase presence in new markets across South-East Asia.
The net profit plunge of 38% quarter-on-quarter from this strategy has caused EBIT (earning before interest and tax) margin compression in the manufacturing segment (5% in 1Q15 vs 6% in 4Q14), as well as foreign exchange loss of around RM5mil from dollar borrowings.
This was despite revenue rising by 18% year-on-year to RM431.1mil, on the back of an 11% jump in manufacturing segment revenues and 46% increase in the property segment revenues.
“The former was mainly driven by additional blown films capacity while the latter was led by the contribution from its latest development in Taman Scientex Senai. Despite such items, the above mentioned market penetration strategy resulted in overall net profit growing at a slower pace of 3%,” Kenanga said.
The research house said it was expecting weaker forward earnings from the manufacturing segment as Scientex continues its market penetration strategy in the second quarter of the financial year 2015. It said Scientex would continue to face forex losses in view of the weakening of the ringgit against the greenback, seeing as to 77% of borrowings in Q1 was denominated in the dollar.
“We are neutral on its property segment, given our property analyst’s weak outlook on Johor properties,” it added.
Kenanga said it had trimmed its profit forecast for the financial years 2015 and 2016 by 22.7% and 18% to RM131.1mil and RM147.2mil after factoring in Scientex’s market penetration strategy, as well as cutting its average resin prices forecasts and GDV forecast assumptions for its property segment to RM550mil from RM650mil.
“Our new SoP-based target price is now at RM5.49 (from RM7.63). We have downgraded the stock from Outperform to Underperform due to overall weakness in both the property and plastic manufacturing outlooks,” it concluded.
http://www.thestar.com.my
KUALA LUMPUR: Kenanga Research has downgraded Scientex Bhd to Underperform from Outperform, slashing target price to RM5.49 from RM7.63 following first quarter results that were weaker than expected.
The plastic packaging manufacturer and property developer’s 1Q15 net profit of RM30.3mil was below expectations, making up only 17.9% of the research house’s full year forecast of RM169.7mil – already lower than consensus forecast of RM180.3mil.
Kenanga said it had lowered its forecast following the move by Scientex’s consumer packaging PE film segment to lower average selling prices (ASPs) in order to increase presence in new markets across South-East Asia.
The net profit plunge of 38% quarter-on-quarter from this strategy has caused EBIT (earning before interest and tax) margin compression in the manufacturing segment (5% in 1Q15 vs 6% in 4Q14), as well as foreign exchange loss of around RM5mil from dollar borrowings.
This was despite revenue rising by 18% year-on-year to RM431.1mil, on the back of an 11% jump in manufacturing segment revenues and 46% increase in the property segment revenues.
“The former was mainly driven by additional blown films capacity while the latter was led by the contribution from its latest development in Taman Scientex Senai. Despite such items, the above mentioned market penetration strategy resulted in overall net profit growing at a slower pace of 3%,” Kenanga said.
The research house said it was expecting weaker forward earnings from the manufacturing segment as Scientex continues its market penetration strategy in the second quarter of the financial year 2015. It said Scientex would continue to face forex losses in view of the weakening of the ringgit against the greenback, seeing as to 77% of borrowings in Q1 was denominated in the dollar.
“We are neutral on its property segment, given our property analyst’s weak outlook on Johor properties,” it added.
Kenanga said it had trimmed its profit forecast for the financial years 2015 and 2016 by 22.7% and 18% to RM131.1mil and RM147.2mil after factoring in Scientex’s market penetration strategy, as well as cutting its average resin prices forecasts and GDV forecast assumptions for its property segment to RM550mil from RM650mil.
“Our new SoP-based target price is now at RM5.49 (from RM7.63). We have downgraded the stock from Outperform to Underperform due to overall weakness in both the property and plastic manufacturing outlooks,” it concluded.
http://www.thestar.com.my
