Neutral on Scientex’s acquisition of land in Rawang
KUALA LUMPUR: Scientex Bhd’s (Scientex) latest acquisition of a land in Rawang garnered neutral views from analysts as the development is not expected to make a major impact on the group’s earnings.
We were not overly surprised as management has always been on the look-out for land banks, and are neutral on the exercise as we do not expect significant impact to earnings. Kenanga Research
Kenanga Research, the research arm of Kenanga Investment Bank Bhd, noted that Scientex’s wholly-owned subsidiary Scientex Park (M) Sdn Bhd has entered into an agreement with Medium Development Sdn Bhd for the proposed acquisition of a 65.3 acres freehold land in Rawang, Gombak for RM85.4 million, implying a price of RM30 per square foot.
While the land is the group’s first foray into the Klang Valley and is slated for mixed development, the research team said the exercise is not expected to have a significant impact to earnings.
“We were not overly surprised as management has always been on the look-out for land banks, and are neutral on the exercise as we do not expect significant impact to earnings.
“We are unable to derive a direct comparable for the said land due to minimal historical references.
“However, based on the assumptions of affordable residential units and a mixed development township, price per unit of RM650,000 on 14 units per acre, we derive a potential gross development value (GDV) of RM592 million, implying 14.4 per cent land cost to GDV ratio which we deem as decent,” it opined.
However, it noted that the land cost could increase on conversion premiums (from agricultural land to commercial) and re-zoning.
“As project details are still sketchy with management yet to guide on the finalised development plans and potential GDV, land cost to GDV may change subject to the residential to commercial mix and pricing strategies,” it added.
On the group’s outlook, Scientex expected its consumer packaging plant expansion to be completed by end-2017, and would focus on ramping up capacity going forward.
Meanwhile, the industrial packaging segment is focused on expansion in the US with contributions accreting mostly in the financial year 2019 (FY19).
“All in, we expect total capacity to increase to 304,000 to 340,000 metric tonne per annum in FY17 to FY18, and sales tonnage to ramp up by circa 16 to 27 per cent year-on-year (y-o-y) as plant utilisation increases throughout FY17 to FY18.
“We believe the group will allocate circa RM260 million to RM140 million for capex in FY17 to FY18, which we have accounted for in our estimates,” said Kenanga Research.
As for the property segment, it noted that the group has launched 10 new projects worth RM395 million up to 9M17, which includes maiden launches in Ipoh, consisting mainly affordable properties.
Overall, the research team maintained its FY17 estimated forecast but increase FY18E earnings by four per cent.
“The launch date is yet to be finalised, but we anticipate launching in 2H18, which would increase FY18E earnings by 4.3 per cent to RM347.3 million,” it added.