Scientex Navigates Mixed Fortunes: Property Shines While Packaging Faces Headwinds

Greetings, fellow investors! Today, we’re diving deep into the latest quarterly report from Scientex Berhad, a prominent Malaysian conglomerate with significant interests in both packaging and property development. The report for the financial quarter ended 30 April 2025 (Q3 FY2025) presents a fascinating picture of resilience in revenue, coupled with a mixed performance across its core business segments. While the Property Division continues its robust growth trajectory, the Packaging Division grapples with a challenging market environment. On a positive note, the company has also announced an interim dividend, signaling its commitment to shareholder returns. Let’s unpack the key highlights and understand what this means for Scientex’s future.

Core Data Highlights: A Closer Look at the Numbers

Overall Group Performance: Steady Revenue, Profit Contraction

For the third quarter of its financial year, Scientex demonstrated remarkable revenue stability, largely maintaining its top line. However, the profit figures tell a slightly different story, reflecting the challenges faced by its packaging arm.

Comparing the latest quarter to the same period last year, revenue saw a marginal increase of 0.2%, standing firm at RM1.11 billion. However, operating profit experienced a slight decrease of 1.2%, while profit attributable to owners saw a more pronounced decline of 5.1%. This translated to basic earnings per share of 7.96 sen, down from 8.41 sen previously.

Looking at the cumulative nine-month performance, the trend is similar:

Over the nine-month period, revenue remained resilient, growing by 0.5% to RM3.33 billion. However, operating profit for the Group decreased by 5.3%, and profit attributable to owners declined by 8.0%, leading to a basic earnings per share of 24.22 sen compared to 26.39 sen in the preceding year corresponding period.

Segmental Performance: A Tale of Two Divisions

Packaging Division

The Packaging Division faced significant headwinds in the current quarter and year-to-date. Revenue for Q3 FY2025 stood at RM614.8 million, a 6.4% decrease compared to RM656.9 million in the preceding year corresponding quarter. This decline was primarily due to softer export sales amidst a challenging market and unfavourable foreign exchange movements. Consequently, operating profit for the Packaging Division dropped significantly to RM34.5 million from RM58.4 million in the preceding year corresponding quarter, impacted by lower revenue and intense market competition.

For the nine-month period, Packaging revenue decreased by 3.7% to RM1.87 billion from RM1.94 billion in the preceding year corresponding period. Operating profit for this division saw a substantial reduction, falling to RM107.6 million from RM172.8 million, mainly attributable to heightened competitive pricing pressures.

Property Division

In stark contrast, the Property Division continued to be a strong performer, providing a crucial counterbalance to the challenges in packaging. Property revenue for Q3 FY2025 increased by a healthy 9.9% to RM495.8 million compared to RM451.1 million in the preceding year corresponding quarter. This growth was driven by higher progress billing from projects in the Central and Southern regions. The quarter also saw seven new project launches across Northern, Central, and Southern regions, achieving higher sales. This translated into a robust increase in operating profit to RM143.0 million from RM121.2 million in the preceding year corresponding quarter.

Over the nine-month period, Property revenue rose to RM1.45 billion from RM1.36 billion in the preceding year corresponding period. Operating profit for the Property Division also saw a healthy increase to RM422.1 million compared to RM386.5 million previously, bolstered by better sales achieved across various regions.

Financial Health and Cash Flow

Scientex’s balance sheet as at 30 April 2025 shows total assets increasing to RM7,444,826,000 from RM6,153,629,000 as at 31 July 2024. A notable increase is seen in ‘Land held for property development’, which surged to RM3,071,596,000 from RM1,765,614,000, reflecting the company’s aggressive land banking strategy. Total liabilities also increased to RM3,126,212,000 from RM2,142,390,000, primarily due to a significant increase in non-current borrowings (Sukuk Murabahah and Sukuk Wakalah issuances) to finance land acquisitions.

Cash flow from operating activities for the nine months ended 30 April 2025 was RM461,873,000, lower than RM575,144,000 in the same period last year. The company’s investing activities saw a substantial net cash outflow of RM1,517,036,000, largely driven by the acquisition of land for property development. This significant investment was partially funded by robust financing activities, which generated a net cash inflow of RM987,501,000, mainly from the issuance of Sukuk.

Net assets per share attributable to owners of the Company improved to RM2.61 as at 30 April 2025, compared to RM2.43 as at 31 July 2024, indicating growth in shareholder equity.

Risk and Prospect Analysis: Navigating the Future

Packaging Division: Resilience Amidst Challenges

The Packaging Division remains realistic about its operating environment, acknowledging intense industry competition, inflationary pressures, foreign currency volatility, and geopolitical uncertainties. Despite these headwinds, Scientex is actively implementing strategic initiatives to enhance business resilience. These include rigorous cost management, improving operational efficiencies, and a strong focus on product development and innovation to deliver customised, value-added, and sustainable packaging solutions. A key sustainability initiative is the implementation of rooftop solar photovoltaic (PV) systems across its headquarters and 10 manufacturing facilities, which is expected to reduce energy costs and Scope 2 emissions. The division is committed to enhancing its competitiveness through these measures.

Property Division: Sustained Growth Momentum

The Property Division maintains an optimistic outlook, particularly for the affordable housing segment. This segment benefits from stable demand and supportive government policies aimed at enhancing homeownership accessibility. Developments across key regions, including Johor, Kedah, Penang, Perak, Selangor, and Melaka, continue to perform well, reinforcing buyer confidence.

In Johor, the overwhelming response to Scientex Pulai 3 has prompted the rollout of Scientex Pulai 4, an adjacent 350-acre township. Furthermore, the new launch of Scientex Bandar Kulai, a 550-acre township, has also received encouraging market reception. The recent completion of a 528-acre land acquisition in Paya Rumput, Melaka, is set to further drive growth and solidify Scientex’s presence in the state’s property landscape. Barring unforeseen circumstances, the Property Division is well-positioned to maintain its growth trajectory and deliver consistent performance for the financial year.

Final Thoughts and Your Perspective

Scientex’s latest report highlights the importance of diversification in a conglomerate’s portfolio. The Property Division is clearly carrying much of the weight, and its continued strong performance is crucial for the group’s overall profitability. The challenges in the Packaging segment, however, serve as a reminder of the global economic uncertainties and intense competition that businesses face.

What are your thoughts on Scientex’s strategy to combat the headwinds in its Packaging division? Do you think the robust growth in its Property segment can continue to compensate effectively for the pressures faced by its other business? Share your insights and perspectives in the comments below!