SCIENTEX BERHAD, a company that no need much introduction, yet still many do not own it. For one reason, the share price is way too high for many and most would rather give a "skip" due to "affordability" issue.
Many retail invetors would still prefer to buy low price tag stocks at "Expensive Valuation" rather than to buy a high price tag stock but at "cheap Valuation".
Let invest using this approach:
Assuming you have RM 100k, and you use it to buy 50,000 shares A @ RM 2.00, the share price appreciated 50%, you gain RM 50k.
Let assume you use the same RM 100k, and you use it to buy 10,000 shares B @ RM 10.00, the share price appreciated 50%, you gain 50k too.
And believe me, If the prospect of a company is good, a high price tag stock can appreciate at equal speed, as other low price tag stock..example. Gloves companies.
Now let get back to Scientex.
Table above shows the Operating Profit Growth and Operating Margin for Scientex Manufacturing and Property Division.
MANUFACTURING DIVISION: manufacturing of stretch film, consumer packaging
I have wrote about the relationship between plastic film biz and crude oil price for Thong Guan.
(1) From above table, the manufacturing division has post a superb profit growth of 53.77% (1) for latest financial quarter (Q1 2016) compared to Q4 2015 as well as average profit growth rate of only 14.84% (2). The significant increase (regardless of against immediate previous Q, Q-to-Q, and average), according to management: was attributed to the higher contribution from both the industrial and consumer packaging products as well as the contribution from the newly acquired subsidiary, SGW Ipoh, of which acquisition was completed in early August 2015."
(2) Noted the Operating Margin has also increased significantly to 9.69% (1) from average.
UPCOMING: (extract info from BursaDummy)
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.
PROPERTY DIVISION:
(1) Noted property segment is acutually doing as per normal. Noted (3) at -22.84% and operating margin at 29.97%. I initially interprete a slow down in property segment. However, by looking further, it is not. Because Q4 2015 was actually an exceptional good result quarter (5) . The Q1 2016 result actually not different much from the norm (4) & (6). And according to UOB report, the company has unbilled sales which can last for about 2 to 3 years and has other launching on affordable home in the pipeline. Therefore, i am not worry about the property division for the moment. Maintaining a normal growth for property segment is good enough for me.
KEY REASON FOR ME TO BUY:
(1) Obviously winner from low crude oil
(2) Beneficially of weak ringgit
(3) exponential growth - expansion is at final stage.
Below target price offer by UOB Kay Hian. (Be their client and you will received a copy of the full report)
Personally, i will use the industry peer's PE as guide. And I put 18 PE for the manufacturing division, which will yield RM 16.80 as my TP. This is 55% upside potential.
Cheers, YiStock
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