SCIENTX (4731) : 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.
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