This article first appeared in The Edge Malaysia Weekly, on January 16 - 22, 2017.

THE country’s property boom ended a long time ago, but Scientex Bhd’s property business still flourishes, generating lucrative earnings for the group.

Property sales have been on a growth path for the past two years. Sales grew to RM500 million in 2014 from RM300 million in 2013. In 2015, it achieved sales of RM650 million.

The bulk of Scientex’s revenue comes from its plastic packaging material manufacturing business but its property business is the main profit contributor.

The property division generated operating profit of RM187.8 million for the financial year ended July 31, 2016 (FY2016), up 7% from the previous financial year, compared with RM124.7 million from the manufacturing division.

For the first financial quarter ended Oct 31, 2016, the property division generated operating profit of RM45.08 million compared with RM23.75 million from the manufacturing division.

While other property developers have switched to a slower gear in view of the current soft market, the group has no intention to apply the brakes on land bank expansion or project launches.

The company has invested about RM400 million in replenishing its land bank over the past two years. At the end of December last year, Scientex announced that it had bought two parcels in Kulai, Johor, from Lee Rubber Ltd for total of RM123.6 million in cash.

“We have the (spare) cash, which was generated by our manufacturing business, so we are acquiring land now. We are still looking for more to buy,” managing director Lim Peng Jin tells The Edge.

He does not seem to be concerned about the current slowdown in the property sector. An engineer by training, Lim is certainly a veteran of the property development industry.

“We hit at the right demand — the affordable range,” he says, adding that when the property market turned soft, Scientex concentrated on affordable homes.

“We have been in property development for 20 years. Our strategy is when the market is good, we focus on high-end products (RM1 million and above). Now, 95% of our new launches are of affordable homes,” says Lim.

Scientex is better known for its plastic packaging material manufacturing business. Interestingly, the company started in property development much earlier than its venture into plastic packaging materials.

“We have been through a few property cycles, like the financial crisis in 1997, when the interest rate was 12%,” says Lim, assuring that the company knows how to survive a downturn.

“Our strategy is to increase the volume. Last year, we launched

RM650 million worth of products and this year, we will launch RM700 million. Eventually, we want to increase to RM1 billion worth of new launches in three to five years. That is why we have acquired land bank,” he adds.

Currently, Scientex is sitting on unbilled sales of RM650 million that could last for two financial years. The company has a total land bank of 2,500 acres, including 200 acres in Melaka.

While analysts who track the company usually do not pay much attention to the company’s property business, Lim, believes that the property and manufacturing businesses complement each other, although they are vastly different in nature.

According to Lim, during an economic downturn, when land is cheap, the company can utilise the cash from the export of its plastic packaging products to increase its land bank at a low cost.

When the economy is on an upward trend, the property division generates a good profit and cash for investment in new manufacturing capacity.

“We have invested RM800 million since 2012 in expanding our manufacturing capacity because the property division has earned good profits,” says Lim.

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