Sunday, 21 June 2020


1. Malaysia’s leading thermoform food and beverage packaging manufacturer that is set to benefit from more stringent hygienic standards in a post-COVID world.

2. New forays into face mask and face shield manufacturing offer attractive double digit margins, higher ASPs, and a positive addition to existing businesses.


3. The price of resin  (which makes up more than 50% of operating cost) are currently near 10-year lows. Lower costs means improved margins going forward.

4. For its F&B packaging products, SCGM has moved into producing higher-margin offerings, offsetting lower revenues with an improved bottom line.


5. The company is well positioned to capitalise on the change in consumer trends (preference for standalone F&B packaging such as ready-to-eat trays, meat trays, salad bowls) and higher health standards (regular usage of face masks and face shields for day-to-day or work purposes) amid the COVID-19 pandemic.

6. Since February 2020, SCGM allocated RM1 million to purchase 5 ultrasonic sealing machines to make face shields and one new face mask machine.

Face shields production capacity : 21k pieces per day

Face mask production capacity : 50k pieces per day

7. The investment is reaping immediate rewards as the pandemic worsened globally; SCGM supplies to local hospitals and pharmacies. Sales from these ventures will be immediately recognised in the latest reporting quarter.

8. From 18 Feb to 31 March 2020 (just 1.5 months), the Company recorded sales of RM2.9 million from its face shields production.

9. At optimal production capacity, the new businesses can potentially generate > RM4 in sales PER MONTH. Remember that the capex outlay for the machines was a mere RM 1 million.

10. As at 9MFY20, exports accounted for 35% of total sales. The company can utilise its existing distribution network and key contacts in the US and Europe for its new healthcare venture, with demand still outstripping supply in emerging/developed nations where COVID-19 still has not peaked in terms of average daily confirmed cases and fatalities.


11. Stock price performance:

April - 19 June 2020 : 71%

May - 19 June 2020 : 27%

June - 19 June 2020 : 1% (recovery to RM1.84 from a recent low of RM1.60)

Price performance last week, from trough to closing : 15%

12. Last close at RM1.84, suggestive of resilience amid broader market volatility and positive pre-earnings expectations.

Comparison with healthcare sector stocks since beginning of June:
less impacted than glovemakers' big fall recently

13. Target Price : RM2.20 (PublicInvest, Trading Buy rating), with the facemask/face shields ventures potentially being an upside rerating catalyst. 20% upside from current levels.

14. The new business contributions, and the prospect of improved margins, are set to be reflected in SCGM’s upcoming quarterly earnings, set to be released by 30 June 2020 (next 2 weeks).

15. PublicInvest’s 17x projected P/E is well within the historical average (FY18 : 16.2x) with the company rebounding from a net loss in FY19.

16. The earnings contribution from the new healthcare businesses have not yet been imputed in PublicInvest’s earnings projection for FY20-22, which is suggestive of further upside.

PublicInvest Research Reports : 31 March 2020 and 1 April 2020
RHB Investment Bank ’20 Jewels 2020’ Research Report
Bursa Malaysia filings