KUALA LUMPUR (Feb 6): Analysts kept their calls intact on Scientex Bhd after its recent acquisition of 24 parcels of freehold agricultural land in Muar, Johor, a move seen favourably due to the planned KL-Singapore high-speed rail station there.

In a filing with Bursa Malaysia on Monday, plastic products manufacturer Scientex announced that its wholly-owned subsidiary, Scientex Heights Sdn Bhd, had entered into a conditional sale and purchase agreement with Singapore-incorporated Guan Hong Plantation Pte Ltd for the proposed land acquisition at a value of RM200 million to develop a mixed-property project.

Kenanga Research, in a note on Tuesday, maintained its earnings forecasts for Scientex and kept its "market perform" rating but trimmed its target price (TP) to RM3.63 from RM3.75, attributed to the cancellation of a land acquisition deal in Tebrau, Johor, which outweighed the positive impact of the increased Revalued Net Asset Value (RNAV) resulting from the latest land deal.

Nonetheless, the research house believes Scientex's Muar land acquisition to be a 'good deal', as the land's price per square foot (psf) was lower than the asking prices of agricultural land in the same area — around the RM9.20 psf mark.

However, it acknowledged that the discount might be due to the land having a more uneven terrain, potentially requiring extra work like cut and fill, and it may have lower land efficiency due to restrictions on how the land can be used.

Nevertheless, Kenanga said its valuation for the Scientex remains at 12 times its estimated earnings for FY2024, reflecting a premium compared to the industry average of 10 times, given the company's significant size as one of the largest players in the region.

"We like Scientex for its competitiveness in the global plastic packaging industry given its size and low-cost structure, and its strong foothold in the affordable housing segment in Johor. However, its plastic packaging business is likely to remain in the doldrums over the near term due to the slowdown in the global economy," it said.

Meanwhile, TA Securities Research has maintained its "sell" call for Scientex and revised its target price upwards to RM4.07 from RM3.89, using a 15x multiple for calendar year (CY2024) manufacturing earnings and an 11x multiple for CY2024 property earnings.

"We are cautiously optimistic about the land acquisition, considering Muar’s inclusion as one of the proposed stations of the KL-Singapore High-Speed Rail (HSR) project," it said.

TA Securities estimates the potential gross development value (GDV) for the land in Muar is likely to be lower than the Senai project (RM8.4 million per acre), Kota Tinggi project (RM3.1 million per acre) and Durian Tunggal project in Melaka (RM2.9 million per acre) due to its distance from the Johor Bahru city center and Malacca town.

"We make no change to our earnings forecast as we expect contributions to begin from FY2026 onwards," the research house said.

At 11 am on Tuesday, shares in Scientex were two sen or 0.51% higher at RM3.91, valuing the group at RM6.06 billion.