Kenanga Research has maintained its “Outperform” rating on Scientex Berhad with an unchanged target price of RM3.91 after the group’s nine-month financial results came in largely within expectations.
The research house said Scientex’s core net profit for the first nine months of FY2026 (9MFY26) rose to RM419.7 million, accounting for 68% of its full-year forecast and 72% of consensus estimates.
A six sen dividend declared during the quarter keeps the company on track to meet Kenanga’s full-year dividend forecast of 13 sen per share.
Property Division Delivers Steady Growth
Scientex’s property development segment continued to record resilient performance, supported by strong sales and steady construction progress across ongoing projects.
For the nine-month period, property revenue increased 5% year-on-year while net profit rose 2%.
The group launched projects with a total gross development value (GDV) of RM1.24 billion, comprising 3,448 units, during the period. These projects achieved an average take-up rate of about 65%, against its FY2026 launch target of RM3 billion in GDV.
Kenanga noted that demand for affordable housing remained encouraging, particularly for homes priced below RM500,000, which account for approximately 70% of Scientex’s property developments.
The brokerage also observed growing demand for homes priced between RM500,000 and RM1 million, signalling improving affordability among homebuyers.
As of the third quarter, Scientex’s unbilled sales stood at RM1.9 billion, providing earnings visibility for upcoming quarters.
Packaging Margins Boost Profitability
While revenue from the packaging division increased only 1% year-on-year, operating profit surged 58%, driven by higher average selling prices and improved margins.
The stronger performance came as resin prices rose significantly following higher global oil prices, allowing the company to benefit from drawing down lower-cost resin inventories acquired earlier.
Kenanga said the stronger profitability was also supported by improving market sentiment and stable operational efficiency, with packaging plant utilisation rates remaining at 62%.
Overall, the group’s revenue rose 3% year-on-year while core net profit increased 12%.
On a quarter-on-quarter basis, revenue slipped 2%, but net profit climbed 4% as stronger packaging earnings offset softer contributions from the property division.
Higher Oil Prices Expected to Support Packaging Earnings
Looking ahead, Kenanga expects the packaging segment to remain a key earnings driver.
The research house noted that resin prices have risen by roughly 80% on average since late February 2026 following escalating geopolitical tensions in the Middle East, resulting in tighter packaging supply conditions globally.
Kenanga forecasts Brent crude oil prices to average US$80 per barrel in 2026 and US$74 per barrel in 2027, suggesting resin prices are unlikely to return to pre-conflict levels even if tensions ease.
As a result, Scientex is expected to benefit from higher selling prices, stronger margins and increased sales orders, particularly in the upcoming fourth quarter.
The completion of solar photovoltaic installations across 10 manufacturing plants in Malaysia is also expected to generate annual cost savings of about RM10 million beginning in FY2026.
Johor Growth Opportunities Remain Attractive
In the property segment, Scientex is expected to benefit from multiple new launches planned for FY2026, including developments in Muar, Pulai and Bestari Jaya.
The company is also well positioned to capitalise on opportunities arising from the Johor-Singapore Special Economic Zone through its remaining 1,100-acre land bank in southern Johor.
In addition, management has indicated interest in expanding its affordable housing footprint into East Malaysia, particularly Sarawak.
Target Price Maintained
Kenanga maintained its RM3.91 target price based on a sum-of-parts valuation, applying an unchanged eight-times forward price-to-earnings multiple to the packaging business and a 50% discount to revised net asset value for the property division.
The research house said Scientex remains attractive due to its scale advantages in the global plastic packaging industry, cost competitiveness and sustained demand for affordable housing, particularly in southern Malaysia.
However, it cautioned that risks include volatile resin prices, weaker consumer demand arising from a prolonged global economic slowdown and increased competition from government-backed affordable housing initiatives.
