Scientex ... Jan12

TA Securities Research

1. Review
Scientex Berhad started off its FY12 strongly thanks to both business divisions. Recall, in 1Q FY12, Scientex
reported net profit growth of 21% whilst revenue grew 15%. We continue to like Scientex thanks to the diversified business operations coupled with secured mid-term to long term growth plans in hand.

2. Manufacturing
Scientex has already installed its new stretch film line which has raised its capacity to 120k MT per annum
putting the company at the fifth largest in the world. Note that stretch film alone contributes 50% of group’s
manufacturing revenue.

Scientex plans to raise its strapping band capacity to 24k MT per annum in 2012 from 16k MT.
Recall, Scientex purchased a piece of land nearby its current plant and will start constructing a new factory
soon. We estimate Scientex will spend approximately RM50mn on the new factory and one production line. The new factory will have the same space capacity as its current factory, hence, Scientex is able to double its
production in 3-5 years.

On a negative note however, Scientex was impacted by the depreciation of USD which led to a contraction in margin. 80% of its products are exported whilst 65% of its purchases are denominated in USD. However, we expect the correction of USD to improve margin FY12 onwards.

3. Property
We remain positive on its property business. We expect Scientex to offer 12-15 new launches per annum.

4. Outlook
Scientex is involved in industrial-level packaging coupled with higher-margin niche industrial products.
Additionally, Scientex stretch film are of a different level compared to other local players as its stretch film
are thinner, which means more cost efficient, hence, price competitive.

Its landbank is located in Johor and may benefit from the development of Iskandar Development. Having said
that, its property development ranges from low-end to mid and high-end property.