Bull markets are born on pessimism, grow on scepticism, mature on optimism and die on euphoria.

Wednesday, April 24, 2013

~ Enquiry on Scientex Berhad (SCIENTX) 森德综合 ~

As part of my earlier analysis on Scientex Berhad, I dropped an email to their investor relation team regarding the high borrowings they takes to acquire GW Plastics Holding at the beginning of year 2013. Below is my email and her reply. 

Dear Ms Jesselyn Chang, 

It's noted that Scientex Berhad had successfully acquired GW Plastics Holding at the beginning of this year through internal fundings and borrowings. This will definite boast the revenue of Scientex Berhad. 

At the mean time based on the lateast quarter report, Scientex Group's borrowings had jump to RM322millions at which RM126millions is short term loan  as a result of the acquisition. This had translated into gearing ratio of 0.50. Apart from that, Scientex Groups has only RM50m cash in hands. This will cause some a poor liquidity. 

As a minor shareholder of Scientex Berhad, I'm writing this email to enquire about what is the step and method Scientex group going to do to pare down the borrowings. Will the borrowings affected the 30% dividend policy? Will Scientex group perform right issue to pare down the borrowings in future?

Appreaciate your responses. Thanks. 


Dear XXX,

As you know, the gearing ratio of Scientex Group after the acquisition of GW Plastic is at 0.5 which is still at a healthy level. If you refer to our last annual report, the group generated approximately RM130m of net operating cash flow from the business. Without further investment, the group will have the capability to repay all the borrowings within 2 years.  

The minimum 30% dividend policy has been announced earlier and the company will adhere to the policy. 

Hope the above explanation is clear.


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