Scientx- a good stock for long-term investment

Background


Scientex Bhd ('Sceintx') is involved in two main businesses: property development (mainly, residential and commercial properties), and manufacturing various packaging products and materials for automotive industry. 

The property segment contributes 28% of revenue but a whopping 66% of pre-tax profit.

Latest Development

Scientx has just announced that it will be acquiring Great Wall Plastic Industries Bhd and GW Packaging Sdn Bhd to increase its annual production capacity for cast stretch film from 120,000 tonnes to 154,000 tonnes. For more, go here.
 
Recent Financial Results

For QE31/7/2012, Scientx's net profit increased by 19% q-o-q or 13% y-o-y to RM23.4 million while revenue was unchanged q-o-q but increased by 10% y-o-y to RM226 million. Both manufacturing & property segments experienced increased revenue but the improved bottom-line came from sales of higher margin products by the property segment.


Table 1: Scientx's last 8 quarterly results


Chart 1: Scientx's last 28 quarterly results

Financial Position

Scientx's financial position is deemed satisfactory. as at 31/7/2012, its current ratio stood at 1.4 times while gearing ratio stood at only 0.1 time. Debtors' collection and Inventory turnover were satisfactory.

Valuation

Scientx (traded at RM2.56 as at 11.30am) has a PE of 6.6 times (based on last 4 quarters' EPS of 39.03 sen). At this PE multiple, Scientx is deemed inexpensive.

Technical Outlook

Scientx is in an intermediate uptrend line, with support at RM2.35. If it can break above the 'horizontal' line at RM2.60, the stock may continue with its prior uptrend.


Chart 2: Scientx's weekly chart as at Oct 4, 2012_11.00am (Source: Quickcharts)

Conclusion

Based on good financial performance & position, inexpensive valuation and positive technical outlook, Scientx could be a good stock for long-term investment.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, Scientx.