logo
Is There An Opportunity With Scientex Berhad's (KLSE:SCIENTX) 47% Undervaluation?

Is There An Opportunity With Scientex Berhad's (KLSE:SCIENTX) 47% Undervaluation?

Yahoo17-04-2025

Scientex Berhad's estimated fair value is RM6.30 based on 2 Stage Free Cash Flow to Equity
Scientex Berhad's RM3.33 share price signals that it might be 47% undervalued
The RM4.08 analyst price target for SCIENTX is 35% less than our estimate of fair value
Does the April share price for Scientex Berhad (KLSE:SCIENTX) reflect what it's really worth? Today, we will estimate the stock's intrinsic value by estimating the company's future cash flows and discounting them to their present value. Our analysis will employ the Discounted Cash Flow (DCF) model. Models like these may appear beyond the comprehension of a lay person, but they're fairly easy to follow.
Remember though, that there are many ways to estimate a company's value, and a DCF is just one method. If you still have some burning questions about this type of valuation, take a look at the Simply Wall St analysis model.
We've discovered 1 warning sign about Scientex Berhad. View them for free.
We're using the 2-stage growth model, which simply means we take in account two stages of company's growth. In the initial period the company may have a higher growth rate and the second stage is usually assumed to have a stable growth rate. To begin with, we have to get estimates of the next ten years of cash flows. Where possible we use analyst estimates, but when these aren't available we extrapolate the previous free cash flow (FCF) from the last estimate or reported value. We assume companies with shrinking free cash flow will slow their rate of shrinkage, and that companies with growing free cash flow will see their growth rate slow, over this period. We do this to reflect that growth tends to slow more in the early years than it does in later years.
Generally we assume that a dollar today is more valuable than a dollar in the future, so we discount the value of these future cash flows to their estimated value in today's dollars:
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
Levered FCF (MYR, Millions)
RM590.0m
RM643.0m
RM667.0m
RM690.0m
RM714.0m
RM739.2m
RM765.4m
RM792.6m
RM821.0m
RM850.4m
Growth Rate Estimate Source
Analyst x1
Analyst x1
Analyst x1
Est @ 3.44%
Est @ 3.49%
Est @ 3.52%
Est @ 3.55%
Est @ 3.56%
Est @ 3.57%
Est @ 3.58%
Present Value (MYR, Millions) Discounted @ 9.9%
RM537
RM532
RM503
RM473
RM445
RM420
RM395
RM373
RM351
RM331
("Est" = FCF growth rate estimated by Simply Wall St)Present Value of 10-year Cash Flow (PVCF) = RM4.4b
We now need to calculate the Terminal Value, which accounts for all the future cash flows after this ten year period. For a number of reasons a very conservative growth rate is used that cannot exceed that of a country's GDP growth. In this case we have used the 5-year average of the 10-year government bond yield (3.6%) to estimate future growth. In the same way as with the 10-year 'growth' period, we discount future cash flows to today's value, using a cost of equity of 9.9%.
Terminal Value (TV)= FCF2034 × (1 + g) ÷ (r – g) = RM850m× (1 + 3.6%) ÷ (9.9%– 3.6%) = RM14b
Present Value of Terminal Value (PVTV)= TV / (1 + r)10= RM14b÷ ( 1 + 9.9%)10= RM5.4b
The total value, or equity value, is then the sum of the present value of the future cash flows, which in this case is RM9.8b. The last step is to then divide the equity value by the number of shares outstanding. Relative to the current share price of RM3.3, the company appears quite good value at a 47% discount to where the stock price trades currently. Remember though, that this is just an approximate valuation, and like any complex formula - garbage in, garbage out.
The calculation above is very dependent on two assumptions. The first is the discount rate and the other is the cash flows. If you don't agree with these result, have a go at the calculation yourself and play with the assumptions. The DCF also does not consider the possible cyclicality of an industry, or a company's future capital requirements, so it does not give a full picture of a company's potential performance. Given that we are looking at Scientex Berhad as potential shareholders, the cost of equity is used as the discount rate, rather than the cost of capital (or weighted average cost of capital, WACC) which accounts for debt. In this calculation we've used 9.9%, which is based on a levered beta of 1.062. Beta is a measure of a stock's volatility, compared to the market as a whole. We get our beta from the industry average beta of globally comparable companies, with an imposed limit between 0.8 and 2.0, which is a reasonable range for a stable business.
See our latest analysis for Scientex Berhad
Strength
Debt is not viewed as a risk.
Dividends are covered by earnings and cash flows.
Weakness
Earnings growth over the past year underperformed the Chemicals industry.
Dividend is low compared to the top 25% of dividend payers in the Chemicals market.
Opportunity
Annual earnings are forecast to grow faster than the Malaysian market.
Good value based on P/E ratio and estimated fair value.
Threat
Revenue is forecast to grow slower than 20% per year.
Whilst important, the DCF calculation ideally won't be the sole piece of analysis you scrutinize for a company. DCF models are not the be-all and end-all of investment valuation. Preferably you'd apply different cases and assumptions and see how they would impact the company's valuation. For example, changes in the company's cost of equity or the risk free rate can significantly impact the valuation. Why is the intrinsic value higher than the current share price? For Scientex Berhad, we've compiled three essential items you should further examine:
Risks: For example, we've discovered 1 warning sign for Scientex Berhad that you should be aware of before investing here.
Future Earnings: How does SCIENTX's growth rate compare to its peers and the wider market? Dig deeper into the analyst consensus number for the upcoming years by interacting with our free analyst growth expectation chart.
Other Solid Businesses: Low debt, high returns on equity and good past performance are fundamental to a strong business. Why not explore our interactive list of stocks with solid business fundamentals to see if there are other companies you may not have considered!
PS. The Simply Wall St app conducts a discounted cash flow valuation for every stock on the KLSE every day. If you want to find the calculation for other stocks just search here.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Orange background

Try Our AI Features

Explore what Daily8 AI can do for you:

Comments

No comments yet...

Related Articles

This Week In Energy Transition - India's Wind Power Surge Fueled By Innovation And Policy
This Week In Energy Transition - India's Wind Power Surge Fueled By Innovation And Policy

Yahoo

time2 hours ago

  • Yahoo

This Week In Energy Transition - India's Wind Power Surge Fueled By Innovation And Policy

India's wind turbine industry is poised for significant growth, driven by strong government support and innovative developments like wind-solar hybrid projects. The Indian government has implemented favorable policies and financial incentives, aiming to boost wind capacity to 140 GW by 2030. Despite challenges such as land acquisition and infrastructure bottlenecks, technological advancements in turbine efficiency and reliability are bolstering the role of wind energy in India's sustainable energy transition. The integration of wind and solar power sources is becoming increasingly popular, enhancing operational efficiency and stabilizing power supply. In other market news, was a standout up 6.9% and closing at ₩428,000, hovering around its 52-week high. In the meantime, trailed, down 11% to close at ₩27,200. A decline in fuel costs and higher nuclear utilization may rapidly boost KEPCO's earnings, influencing investor sentiment. Click here to explore the full narrative on Korea Electric Power. Check out "Opportunities In The Turbulent Transition To Greener Energy" for insights on upcoming investment chances in renewable stocks and nuclear energy; get in fast to spot potential opportunities amidst market shifts. ended the day at $308.58 up 4.6%. finished trading at $140.76 up 0.4%. closed at $160.16 down 3.7%. Click this link to deep-dive into the 157 companies within our Energy Transition Stocks screener including 3i Group, CTP and Kuehne + Nagel International. Seeking Other Investments? We've found 17 US stocks that are forecast to pay a dividend yeild of over 6% next year. See the full list for free. This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sources: Simply Wall St "India Wind Turbine Industry Report 2025: $4.84 Bn Market Trends, Competitive Landscape, Forecasts & Opportunities 2021-2031 - Growing Government Policies, Rise of Wind-Solar Hybrid Projects" from Research and Markets on GlobeNewswire (published 06 June 2025) Companies discussed in this article include KOSE:A267260 NasdaqGS:TSLA NYSE:CVX NasdaqGS:FSLR and KOSE:A015760. This article was originally published by Simply Wall St. Have feedback on this article? Concerned about the content? with us directly. Alternatively, email editorial-team@ Sign in to access your portfolio

The Returns On Capital At Latham Group (NASDAQ:SWIM) Don't Inspire Confidence
The Returns On Capital At Latham Group (NASDAQ:SWIM) Don't Inspire Confidence

Yahoo

time3 hours ago

  • Yahoo

The Returns On Capital At Latham Group (NASDAQ:SWIM) Don't Inspire Confidence

If we want to find a stock that could multiply over the long term, what are the underlying trends we should look for? One common approach is to try and find a company with returns on capital employed (ROCE) that are increasing, in conjunction with a growing amount of capital employed. This shows us that it's a compounding machine, able to continually reinvest its earnings back into the business and generate higher returns. Having said that, from a first glance at Latham Group (NASDAQ:SWIM) we aren't jumping out of our chairs at how returns are trending, but let's have a deeper look. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. For those that aren't sure what ROCE is, it measures the amount of pre-tax profits a company can generate from the capital employed in its business. The formula for this calculation on Latham Group is: Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities) 0.021 = US$15m ÷ (US$825m - US$83m) (Based on the trailing twelve months to March 2025). So, Latham Group has an ROCE of 2.1%. In absolute terms, that's a low return and it also under-performs the Leisure industry average of 12%. Check out our latest analysis for Latham Group In the above chart we have measured Latham Group's prior ROCE against its prior performance, but the future is arguably more important. If you'd like, you can check out the forecasts from the analysts covering Latham Group for free. In terms of Latham Group's historical ROCE movements, the trend isn't fantastic. Over the last five years, returns on capital have decreased to 2.1% from 5.8% five years ago. Meanwhile, the business is utilizing more capital but this hasn't moved the needle much in terms of sales in the past 12 months, so this could reflect longer term investments. It's worth keeping an eye on the company's earnings from here on to see if these investments do end up contributing to the bottom line. In summary, Latham Group is reinvesting funds back into the business for growth but unfortunately it looks like sales haven't increased much just yet. And in the last three years, the stock has given away 34% so the market doesn't look too hopeful on these trends strengthening any time soon. Therefore based on the analysis done in this article, we don't think Latham Group has the makings of a multi-bagger. One more thing to note, we've identified 1 warning sign with Latham Group and understanding this should be part of your investment process. While Latham Group may not currently earn the highest returns, we've compiled a list of companies that currently earn more than 25% return on equity. Check out this free list here. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data

ProPetro Holding (NYSE:PUMP) shareholders are up 12% this past week, but still in the red over the last three years
ProPetro Holding (NYSE:PUMP) shareholders are up 12% this past week, but still in the red over the last three years

Yahoo

time3 hours ago

  • Yahoo

ProPetro Holding (NYSE:PUMP) shareholders are up 12% this past week, but still in the red over the last three years

This week we saw the ProPetro Holding Corp. (NYSE:PUMP) share price climb by 12%. Meanwhile over the last three years the stock has dropped hard. Tragically, the share price declined 53% in that time. Some might say the recent bounce is to be expected after such a bad drop. Perhaps the company has turned over a new leaf. The recent uptick of 12% could be a positive sign of things to come, so let's take a look at historical fundamentals. Trump has pledged to "unleash" American oil and gas and these 15 US stocks have developments that are poised to benefit. In his essay The Superinvestors of Graham-and-Doddsville Warren Buffett described how share prices do not always rationally reflect the value of a business. One way to examine how market sentiment has changed over time is to look at the interaction between a company's share price and its earnings per share (EPS). During five years of share price growth, ProPetro Holding moved from a loss to profitability. However, it made a loss in the last twelve months, suggesting profit may be an unreliable metric at this stage. Other metrics might give us a better handle on how its value is changing over time. We note that, in three years, revenue has actually grown at a 10% annual rate, so that doesn't seem to be a reason to sell shares. It's probably worth investigating ProPetro Holding further; while we may be missing something on this analysis, there might also be an opportunity. The graphic below depicts how earnings and revenue have changed over time (unveil the exact values by clicking on the image). If you are thinking of buying or selling ProPetro Holding stock, you should check out this FREE detailed report on its balance sheet. ProPetro Holding shareholders are down 34% for the year, but the market itself is up 14%. However, keep in mind that even the best stocks will sometimes underperform the market over a twelve month period. Longer term investors wouldn't be so upset, since they would have made 0.6%, each year, over five years. If the fundamental data continues to indicate long term sustainable growth, the current sell-off could be an opportunity worth considering. While it is well worth considering the different impacts that market conditions can have on the share price, there are other factors that are even more important. To that end, you should be aware of the 1 warning sign we've spotted with ProPetro Holding . If you would prefer to check out another company -- one with potentially superior financials -- then do not miss this free list of companies that have proven they can grow earnings. Please note, the market returns quoted in this article reflect the market weighted average returns of stocks that currently trade on American exchanges. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data

DOWNLOAD THE APP

Get Started Now: Download the App

Ready to dive into the world of global news and events? Download our app today from your preferred app store and start exploring.
app-storeplay-store