Scientex latest Pulai land buy to fuel profit growth

PETALING JAYA: Scientex Bhd’s latest freehold land acquisition in Pulai, Johor Baru, is viewed favourably as it could replenish the group’s landbank and support its medium to long-term earnings growth.

TA Research said the acquisition is supported by Scientex’s strategic location adjacent to the company’s existing developments and a reasonable acquisition price.

“Management indicated the acquired land would be developed into a mixed-property development, although no specific gross development value (GDV) guidance has been provided at this stage.

“Based on the GDV of its existing Pulai developments, we estimate a potential GDV of about RM2.8bil (assuming 10% of the land size is allocated for infrastructure and a GDV value of RM6.3mil per acre).

“As such, the acquisition cost is equivalent to about 20% of our estimated GDV, in line with the general rule of thumb of 20%,” the research house said in a report yesterday.

Scientex announced this week that it had entered into a conditional sale and purchase agreement with Pangkal Budiman Sdn Bhd for the proposed acquisition of 502.6 acres of freehold land in Pulai, Johor Baru, for RM580.2mil (or RM26.5 per sq ft).

The proposed acquisition is expected to be completed by the second half of financial year 2027.

The acquired land is located adjacent to Scientex’s existing developments in Pulai including Taman Pulai Mutiara, Taman Pulai Mutiara 2, Taman Pulai Duta and Taman Pulai Duta 2.

“According to management, the existing Scientex Pulai township has a total potential GDV of RM7.6bil, of which RM4.4bil represents current and future GDV.

“Supported by strong demand, the group has sold 90% of the units launched in Pulai,” TA Research said.

The research house said the acquisition price of RM26.5 per sq ft represented a 6% premium to Scientex’s previous land acquisition in June 2024 and a 10% premium to two precedent agricultural land transactions in Pulai.

“We view the land cost as reasonable, given the sizeable land parcel secured and the appreciation in land values in the surrounding area.

“This is following the successful development of Scientex Pulai 1 & 2 and the ongoing development of Pulai 3 & 4,” TA Research said.

The research house said there was potential for the acquired land to generate a GDV above its conservative estimate of RM2.8bil, supported by Scientex’s established track record and strong demand for its developments in Pulai.

TA Research maintained its earnings estimates for the development at this juncture, pending completion of the proposed acquisition.

“Following the completion of both the Mintpack share acquisition and the proposed Pulai land purchase, we estimate Scientex’s net gearing could increase to about 0.5 times from 0.38 times as at financial year 2026 (FY26), assuming 80% debt financing for both acquisitions,” the research house said.

Despite the potential increase in leverage, TA Research believes the group should be able to maintain its gearing at a manageable level, supported by its strong cash generation.

Scientex generated RM843.9mil in net operating cash flow in FY26.

“In addition, the two acquisitions are expected to be completed on a staggered basis, providing the group with greater flexibility in managing its funding requirements,” the research house said.

TA Research maintained a “buy” call on Scientex with an unchanged target price of RM4.95 per share.