| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report indicates that the company’s financial year 2025 (FY25) results largely met expectations, with core profit showing resilience driven by strategic cost management and robust property development. Despite challenges in its packaging segment, the overall performance aligned closely with full-year estimates.
Performance Review
The company reported a 7% quarter-on-quarter increase in 4QFY25 core profit, representing a 2% year-on-year growth. This brought the full-year FY25 net profit to MYR528.7 million, a 2% decline year-on-year, but still within 101-102% of consensus estimates. The company also declared a dividend per share (DPS) of 12 sen for FY25, an increase from 10 sen in FY24, translating to a core payout ratio of 35%. Despite significant capital expenditure in FY25, net gearing remained manageable at 0.48x.
The packaging unit experienced a 4% year-on-year revenue slip in FY25, with utilisation rates remaining stable at just over 60%. Intense competition from China put pressure on margins, causing packaging EBIT to fall by 31% year-on-year and bringing the FY25 margin down to 6% from 8.4% in FY24. However, a sequential improvement was observed in 4QFY25, with margins recovering to 6.9% due to lower raw material and electricity costs. Conversely, the property segment delivered strong results, with sales and EBIT climbing 8% and 14% year-on-year, respectively, fueled by sustained demand for affordable housing and successful new launches.
Future Outlook
Management anticipates the packaging market will remain challenging in the near term but believes it is at the trough of its cycle, with gradual demand recovery expected. This recovery is projected to be supported by lower raw material costs and improved operational efficiencies. For FY26, the company targets packaging margins of 6-7% and aims to increase market share by boosting production volume. The property segment is expected to continue as the primary earnings driver, with management guiding for over MYR3 billion in new launches and take-up rates of 70-80%.
Investment Bank’s Perspective
The investment bank maintains a Neutral recommendation, with a new Sum-of-Parts (SOP)-based target price of MYR3.55, a slight increase from MYR3.50. This adjustment reflects a 1% and 6% increase in FY26-27F earnings estimates, driven by higher imputed packaging margins and property sales. The target price incorporates a 0% ESG premium/discount. Key risks include adverse changes in demand for flexible packaging products and affordable homes, as well as sharp increases in raw material prices.
