Scientex's property arm offsets packaging woes
UOBKH Research said the group's outlook appears mixed.
PETALING JAYA: Scientex Bhd 's financial performance is likely to be propped up by its property development arm, driven by demand for affordable housing.
This comes as its plastic packaging division continues to struggle with external challenges, particularly stiff competition from Chinese manufacturers and foreign-exchange (forex) losses.
The company's third-quarter results for the period ended April 30, 2025 (3Q5), released on Wednesday, showed continued weakness in its packaging arm.
UOB Kay Hian (UOBKH) Research noted that fierce competition from China and unfavourable forex movements resulted in margin compression.
The research house, which maintained its 'buy' call on the stock with a higher target price of RM4.10 (up from RM4.05), said the group's outlook appears mixed.
While property earnings remain robust, amid recent landbank acquisitions signalling upcoming launches, the plastic packaging business faces structural headwinds from Chinese supply.
'As a result, we believe the property segment will remain the main growth driver for Scientex in the near term, pending potential consolidation in the packaging industry,' it said.
The research house added that forecasts for the financial year ending July 31, 2025 (FY25), to FY27 have been revised downward to account for lower margins in the packaging arm.
RHB Research shared that Scientex's management believes the plastic packaging market will remain challenging in the near term, especially in the industrial sub-segment.
However, a rebound is anticipated in 2026, supported by returning demand for the consumer sub-segment, which makes up 45% to 50% of total packaging revenue.
'On the property business, we are optimistic that Scientex is on track to achieve its property launch target of more than RM2bil for FY25.
'Hence, we continue to expect the property segment to be the main earnings contributor in the coming quarters,' the research house said.
RHB Research remains 'neutral' on Scientex, lowering its target price to RM3.50 from RM3.70 and cutting earnings assumptions for FY25 to FY27.
Meanwhile, TA Research noted that Scientex's management expects sustainable packaging demand to remain strong despite the subdued outlook.
'On a positive note, we expect average selling prices and volumes for consumer packaging to remain stable, supported by a wider range of product offerings and designs for customers,' it said.
The research house maintained its 'buy' call but trimmed its target price to RM4.85 from RM5.54 and cut earnings forecasts for FY25 to FY27,
It said Scientex plans to launch 8,000 affordable housing units in FY25, up from 6,336 in FY24.
Kenanga Research kept its 'market outperform' call and target price at RM3.60, noting downside risks have largely been priced in.
However, it flagged the need to monitor resin prices, a key plastic packaging raw material, due to recent surge in crude oil prices.
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