Hot Stock Scientex rises 2.4% on positive 3Q results

by **Cals** Sat 21 Jun 2014, 03:51

Hot Stock Scientex rises 2.4% on positive 3Q results

Business & Markets 2014

Written by Jeffrey Tan of theedgemalaysia.com

Friday, 20 June 2014 11:47

KUALA LUMPUR (June 20): Stretch film manufacturer Scientex Bhd's share price rose as much as 2.4% after it reported positive results in the third quarter ended Apr 30, 2014.

Yesterday, the firm posted net profit jump of 23% year-on-year (y-o-y) to RM36.34 million from RM29.53 million, while revenue grew to RM426.77 from RM345.1 million.

At 11.27 am today, Scientex gained 9 sen or 1.5% to RM5.90. The ninth top gainer saw trades of 113,600 shares. It had earlier hit a high of RM5.95.

In a note, TA Securities said the 9M FY14 net profit came largely within house and streets' estimates accounting for 67% and 68% respectively, as it expects a stronger fourth quarter ahead.

The TA research team said it upgraded Scientex to a "buy" call from "hold" and raised TP to RM6.68.

However, it lowered earnings forecast by 1.3% for FY14, 8.6% for FY15 and 13.7% for FY16.

“We have revised our margin assumption for the manufacturing segment downwards by 0.3 percentage points for the next three years, on the assumption higher sales will largely be generated by lower margin for films,” the research team said.

“We have also scaled back on higher-end property sales in Skudai and Melaka to consider for the current weak market condition,” TA said.

Meanwhile, Kenanga Research said the 9M FY14 net profit was slightly below expectations, amounting to 68% of both house full-year FY14 estimates as well as market consensus.

“We are trimming our FY14E and FY15E earnings forecasts, down 5.6% to RM137.3 million and down 5.1% to RM161.7 million respectively,” said analyst Ooi Mong Huey of Kenanga.

Ooi said this follows a reduction of her revenue forecast by lowering capacity utilisation rate and gross margin assumption for the manufacturing segment, as her previous plastics sales forecast was aggressive.

As a result of the lower manufacturing earnings forecast, Ooi downgraded target price (TP) for Scientex to RM6.34 from RM6.69, but maintained an "outperform" call for the stock.

“We are still positive on Scientex's longer term prospects, but we take note of the rise in raw material prices that has affected margins for the manufacturing segment,” said Ooi.