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15 things to know about Scientex before you invest (updated 2018)

15 things to know about Scientex before you invest (updated 2018)

Established in 1968, Scientex Berhad has grown right into a conglomerate which derives revenue from two core enterprise segments. First, Scientex manufactures a variety of plastic packaging merchandise which it exports to shoppers situated in additional than 60 nations worldwide. Second, Scientex is a good property developer with numerous tasks concentrated primarily in Johor, Malaysia.

For a few years, Scientex has been a darling for progress buyers. This is because of its spectacular monitor report of delivering a robust set of monetary outcomes yr after yr which had led to a long-term appreciation in its inventory worth. As I write, Scientex is value RM4.three billion in market capitalization — round 31 occasions its market cap of RM135.7 million in 2009.

Lately, Scientex launched its newest 2018 annual report. I took the freedom to undergo it and, on this article, I’ll give an replace on its efficiency during the last 10 years, its newest progress plans, and valuation metrics.

Listed here are 15 issues to find out about Scientex earlier than investing:

Manufacturing

1. In 2018, Scientex streamlined its manufacturing operations and recategorized its product vary into three classes: stretch movies, customized movies, and specialty merchandise. Presently, it runs 15 manufacturing amenities situated in Malaysia, Vietnam, and america with a manufacturing capability of 450,00zero metric tons (MT) per yr, up from 356,00zero MT in 2017.

2. Within the final 10 years, Scientex aggressively expanded its manufacturing capability and product vary via strategic acquisitions. In complete, the corporate invested RM663.eight million in buying subsidiaries through the interval. Here’s a record of its main acquisitions:

Main Subsidiaries Stake Date of Acquisition Value (RM hundreds of thousands)
Scientex Packaging Movie Sdn Bhd 100% 14 Jun 2010 99.34
Scientex Tsukasa (Vietnam) Co. Ltd 75% 16 Jul 2010 10.85
Nice Wall Plastic Industries Bhd 100% eight Jan 2013 283.20
Scientex Nice Wall Sdn Bhd 100% 13 Feb 2014 39.00
Scientex Advance Sdn Bhd 100% 11 Aug 2015 58.00
Klang Hock Plastic Industries Sdn Bhd 100% 2 Might 2018 190.00

Supply: Scientex Bhd annual stories

three. Subsequently, Scientex launched into an formidable plan to extend the manufacturing capability of its amenities that have been owned by its newly-acquired subsidiaries, notably during the last 5 years. As well as, Scientex arrange two new amenities and elevated its manufacturing capability. Here’s a listing of tasks which were accomplished with operations commencing since 2016:

Product &
Location of Plant
Manufacturing Capability (2014) Manufacturing Capability (2018) Graduation
Interval
CPP Movie, Melaka zero MT 12,00zero MT Jan 2016
BOPP Movie, Pulau Indah, Klang 6,00zero MT 60,00zero MT Dec 2016
PE Movie, Rawang, Selangor 24,00zero MT 84,00zero MT Finish-2017
Stretch Movie,
Phoenix, USA
zero MT 30,00zero MT Jan 2018

Supply: Scientex Bhd annual studies

four. Therefore, Scientex’s manufacturing division has skilled speedy progress in each gross sales and income during the last 10 years. Gross sales elevated from RM428.four million in 2009 to RM1.90 billion in 2018. This resulted in progress in phase income from RM21.eight million in 2009 to RM126.9 million in 2018.

Supply: Scientex Bhd annual studies

Property improvement

5. Scientex started its enterprise into property improvement in 1995 to diversify its sources of revenue. Since then, this division has constructed and delivered greater than 17,00zero reasonably priced houses situated primarily in Johor, Malaysia. For the final 5 years, Scientex has been actively rising it land financial institution because it envisions to ship 50,00zero reasonably priced houses by yr 2028. As I write, it has collected three,265 acres of land in Johor, Melaka, Selangor, and Perak. Here’s a listing of improvement land which have been acquired by Scientex during the last three years, which might be developed over the subsequent 10 years:

Location Yr Measurement
(Acres)
Value (RM tens of millions)
Pulai, Johor 2016 322.86 232.21
Pulai, Johor 2016 10.52 eight.77
Durian Tunggal, Melaka 2017 197.40 45.70
Pulai, Johor 2017 2.89 2.01
Hulu Kinta, Perak 2017 Plot 1: 14.38/Plot 2: 55.00 70.27
Pulai, Johor 2018 335.57 293.80
Rawang, Selangor 2018 65.33 87.94
Kulai, Johor 2018 121.20 127.37

Supply: Scientex Bhd annual studies

6. Scientex’s property division has reported speedy progress in each income and income according to the growing demand for reasonably priced properties in Malaysia. Its revenues have risen from RM81.three million in 2009 to RM722.2 million in 2018. This resulted to greater phase income from RM20.7 million in 2009 to RM237.5 million in 2018.

Supply: Scientex Bhd annual stories

Group financials

7. Scientex has achieved a powerful CAGR of 20.zero% and 25.5% in income and shareholders’ earnings respectively during the last 10 years. Fromm 2009 to 2018, income elevated from RM509.7 million to RM2.63 billion, and shareholders’ earnings grew from RM37.5 million to RM289.eight million. Income have elevated quicker than gross sales as a result of Scientex’s property phase — which has larger revenue margins — has grown quicker than its manufacturing phase through the interval. General, Scientex has a 10-year common return on fairness of 16.6%.

Supply: Scientex Bhd annual reviews

eight. As at 31 July 2018, Scientex has long-term liabilities of RM405.7 million and a gearing ratio of 23.zero%. During the last 10 years, Scientex has generated RM1.97 billion in constructive money flows from operations and raised RM527.90 million in internet long-term debt and equities. Out of which, the corporate has:

  • Invested RM784.7 million on capital expenditures
  • Invested RM882.5 million in buying land for property improvement
  • Invested RM663.eight million in buying subsidiaries
  • Paid RM417.1 million in dividends to shareholders

Evidently, Scientex has been environment friendly in producing money move from its enterprise operation, utilizing it to quickly increase operations, and reward its buyers with constant dividends.

Supply: Scientex Bhd annual reviews

Progress drivers

9. The primary part of a stretch movie manufacturing plant in Phoenix, USA has been commissioned with a manufacturing capability of 30,00zero MT every year. As I write, Scientex is engaged on Part 2 of the undertaking. It’s anticipated to be accomplished by 2019 and can double its manufacturing capability to 60,00zero MT a yr.

10. In 2 Might 2018, Scientex accomplished its acquisition of Klang Hock Plastics Industries Sdn Bhd (KHPI). For the previous three months, KHPI has generated RM96.6 million in income and RM5.69 million in shareholders’ earnings. KHPI will contribute its first full yr of monetary leads to 2019.

11. On 15 August 2018, Scientex acquired two plots of freehold land measuring 208.9 acres in Alor Gajah, Melaka for RM68.2 million. They’re situated near its present Durian Tunggal improvement and are acquired with the intention of property improvement sooner or later.

Valuation

12 .P/E ratio: As at eight November 2018, Scientex is buying and selling at RM8.84 a share. In 2018, it reported earnings per share of RM0.596. Therefore, its present P/E ratio is 14.83, close to its 10-year excessive of 15.74.

13. PEG ratio: In Level 7, I discussed that Scientex has grown its earnings by 25.5% yearly during the last 10 years. Therefore, its present PEG ratio is zero.58. As it’s under 1.zero, the corporate is taken into account undervalued based mostly on the PEG ratio.

14. P/B ratio: As at 31 July 2018, Scientex has a ebook worth per share of RM3.61. Thus, its present P/B Ratio is 2.45, near its highest in 10 years.

15. Dividend yield: In 2018, Scientex paid out RM0.20 in dividends per share. If Scientex maintains its dividend at RM0.20, its dividend yield is 2.26% based mostly on its newest share worth of RM8.84. That is decrease than the three% in fastened deposit charges provided by Malaysian banks presently.

The fifth perspective

Scientex has constructed a monitor report of strong progress during the last 10 years. In consequence, its inventory worth has grown tremendously with its market capitalization rising 31 occasions in that interval.

In the mean time, Scientex might be on the costly aspect. In case you are investing for dividends, you possibly can in all probability discover many shares that provide a greater yield. And in case you are investing for capital positive factors, then Scientex’s present P/E and P/B ratios are close to their historic highs.

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