Introduction all bundling groups and Scientex Packaging Berhad
Founded in Malaysia, Scientex Berhad became Sendririan Berhad in 1965 in the scientific textile industry. Scientex’s core business is divided into two strategic business units, manufacturing and real estate development. (Refer Figure 1) Scientex Berhad manufactures and supplies different catogories products such as industrial packaging, consumer packaging, automotive interior and green energy products. Its industrial packaging products include stretch film, PP strapping band, FIBC bag, woven bag, HDPE and PP tying bag and corrugated carton box. (Refer Figure 2) The company provides TPO sheets and PVC and laminate to car assemblers and automotive manufacturers (Refer Figure 3) Scientex Berhad was founded in 1968 and listed on Bursa Malaysia since 1990.
It serves customers in Indonesia, Thailand, Australia and Japan. Scientex Berhad was established in 1968 and is headquartered in Shah Alam, Malaysia.
It was first recorded on February 2, 1990, on behalf of Scientex Industries. In 2004, a support staff member at Woventex Corporation Berhad secured Scientex’s bundled business on its behalf and renamed Scientex Pakaging Berhad. Along these lines, in March 2008, Scientex withdrew all bundling groups and Scientex Packaging Berhad was delisted in April 2008.
Organizaion chart is the reporting structure and division of labour in an organisation. There are Board of Directors and Top management in organisation structure of Scientex Berhad.
The first obligation of the Chairman is to control and manage the Board and in the effective discharge of its supervisory part. Furthermore, the Chairman must ensure that the Board and the general meeting is in orderly and efficiently in conduct. Moreover, the Chairman must also ensure that all members of the Board has given out useful and facilitates effective contribution while in meeting. Lastly, the Chairman is to promote helpful and healthy working association with the Management while maintaining independence.
The first obligation of the Managing Director are in charge of the administration of the daily affairs of the group with such powers and authority as delegated by the Board. Secondly, Managing Director acts as liaison between Management and the Board. Furthermore, Managing Director ensures the financial reporting of the group are in compliance and properly maintained with existing laws and regulations. Lastly, Managing Director ensures the Management follow and implements all policies adopted by the Board. (Board Charter, 2013)
Scientex Berhad consists of two main arms that are the manufacturing of plastic packaging products and property development.
Firstly, the property development of Scientex Berhad is Scientex Johor, Sientex Melaka and Scientex Perak. The Scientex Johor is located at Pasir Gudang, Kulai 1 & 2, Skudai, Senai 1 & 2 and Pulai. Scientex Melake is located at Ayer Keroh and Durian Tunggal. In Perak, Scientex is operated the factory at Klebang and Meru 1 & 2.(Refer to Figure 3.1.1)
Secondly, Scientex Berhad produces a variety of plastics packaging.They can be grouped into 4 broad categories that are Automotive Interior,Consumer Packaging,Industrial Packaging and Green Energy Products. (Refer to Figure 3.1.2)
3.2 SWOT Analysis
SWOT are common strategic business planning tool to evaluate the strengths, weaknesses, opportunities and threats. It is used to develop short-term and long-term strategies as well as decision-making for the Company. SWOT Analysis shows Scientex Berhad company’s businesses and operations.
1. Capacity Boots
The key to success is efficiency of the industrial packaging business. To increase efficiency and better quality control, Scientex has been investing heavily in machinery and equipments tools. After our recent visit to the Pulau Indah-Port Klang stretch film factory, we have witnessed the efficiency improvements from the streamlined plant structure, the full automation of its machinery and equipments, as well as transportation segments and cost-saving from storage. For close to five decades, Scientex are going to planning to further expand the stretch film production capacity to 120,000 MT per annum by FY2011.The group also plans to increase the production capacity of PP strapping band from the current 16,200MT to 24,000MT in FY2013. Scientex is spending additional RM18m to improve facilities in stretch film and strapping product. (Refer Figure 3.2.1)
2. Wide Product Range
Scientex was becoming a leading manufacturer in manufacturing of various industrial and consumer packaging products. With an export market that reach in Japan, South Korea, Indonesia, Europe, Australia and America. Its industrial packaging products comprise PP strapping band, stretch films, HDPE, FIBC bag, woven bag, PP tying bag and corrugated carton box. Scientex’s consumer packaging products include shrink hood, printed film, lamination base film, shrink film stretch hood, barrier film, wicket bags and PU adhesives.(Refer Figure 3.2.2) The company also provides PVC leather and laminate to automotive manufacturers and car assemblers. Scientex also involved in property development in South Malaysia. Scientex is a highly successful and reliable property developer. Today Scientex remaining to strengthen its presence within development locations to expend its property footprint to other areas. (Refer Figure 3.2.3)
1. Environmental Impact
Scientex face the problem of environmental impact.Nowadays the customer more concern about the environmental-free issue.So this may poses a disadvantage to Scientex because its main business is plastic products and packaging.For example,the larger companies like Tesco have starts to practice not to provide plastics bags for their customers.This is because plastic bags are not decomposed products.
1. New Development
Scientex Berhad develops the economy to create new products and services. For example, Scientex gives an eye on consumer packaging, it because the dynamic product that improving the consumer conscious on quality and integrity of products. Scientex Berhad made an important moves that take a positive effect on huge worldwide potential and opportunities that this market segment offers for Scientex.
2. New Acquisitions
In 2014, Seacera Poly films were acquired by Scientex Bhd. Biaxially Oriented Polypropylene (BOPP) films is an established manufacturer that has developed a significant presence in the domestic market since incorporation in 1990. This acquisition causes Scientex able to extend its product range and services to the flexible film lamination industries.
In 2015,Scientex acquired packaging player Mondi Ipoh Sdn Bhd to expand its consumer packaging products portfolio which further gave Scientex an opportunity to expand into hygiene products packaging and heavy duty sacks serving large multinational companies. (Consumer Packaging, 2013)
GST is a consumption tax. Based on the concept of value-added which will replace the current national tax and services tax (KPNG, 2015).Malaysia economic is slowing down and all exterior changes constantly. The implementation of GST causing Malaysians has take the bills seriously, perhaps now noticed there is a service charge on their bills (GST Malaysia, 2015). This situation may affect the consumers not likely to spend more due to their lower purchasing power. Hence, it may reduce the number of customer or supplier, leading to lower the profitability of the company.
The competitor of Scientex Barhad is NOW Plastics Inc.
First of all, NOW Plastics is one of the competitors of Scientex Bhd. It offers a wide line of world-class and special plastic films and bags. Moreover, the NOW Plastics by using the tailor-made supply chain management, it can give their clients the best off-shore products while enjoying the benefits of working with a domestic company.
3. Competitive Market
Besides,it will also meet more competitive market.Scientex also face the competitive problems.There are a lot of competitors in the market like BP Plastic Bhd and Thong Guan Industries Berhad.So,Scientex may face the problem of competing with lower cost,creating more advance products and doing more advertising and marketing to compete with its competitors.
3.3 BCG Analysis
The BCG matrix approach is based on the product lifecycle concept and can be used to determine what priority should be given to a product portfolio at the business level. An industry should have a portfolio that includes market growth rate and relative market share to ensure company’s long-term value. BCG model is a very important because its help managers evaluate the company’s current portfolio in 4 categories where Star means it is both high market share and growth. The one have low growth but high in market share is Cash Cows. Question Marks is opposite of Cash Cows which is high growth but low market share and Dogs is the worst which has low growth and low market share.
In this assignment, the market growth rate is referring to Scientex Berhad. Scientex Berhad is a company that continually opens up new areas in manufacturing and real estate development. In Asia, they are leading provider in PP strapping bands as well as a leading producer of other industrial packaging products such as FIBC bags, woven bags and raffia products. Scientex Berhad, Malaysia’s leading producer of consumer packaging goods and continues to be the prop of automotive interior parts.
According to Kenanga Research 2013, Scientex is one of the top three stretch film producers in the world for the logistics industry and also is the largest stretch film producer in the Asia Pacific region. Table 3.3.1 also shows that Scientex Berhad has highest stretch film capacity among other domestic plastic industry. Scientex Berhad also has a well grown in the market growth from year to year. From Chart 3.3.2, we saw that Scientex Stretch Film’s growth has rising every year from 1998 to 2013. Chart 3.3.3 showed that the stretch film will continue to be the largest contributor to group revenue which have (42.0%).
Scientex Berhad was engaged in property segment which have good market share and growth every year. Scientex is one of the most attractive developers of Johor among existing players and newcomers in terms of land bank locations and product offerings or concepts (Kenanga Research). Through Chart 3.3.4, it has shown the revenue and gross margin from year 2009 to 2013. EBITDA margins in Scientex’s real estate segment were as high as 32.3%, mainly due to higher-end product sales, in FY13. However, management indicated that more high-end products may not be introduced in FY2014 compared to FY13. So Kenanga forecast that, group EBITDA margins may not be as compelling as in FY13. So, it’s a question that Scientex Berhad has strong margins growth in property segment but will the trend continue.
Other than this, Scientex is currently the largest producer of PP strapping in Asia to meet one-third of Japan’s needs as well as other export markets outside Australia, New Zealand, Mexico and Denmark. Scientex have 9% of Group’s Financial Year 2013 manufacturing revenue and 75% utilisation rate in Financial Year 2013. The growth of the packaging business is driven by the Group’s continuous capacity expansion to meet global demand. In July, Scientex Packaging Film (SPF) become the fifth-largest stretch film producer in the world and also had increased its annual capacity by 20% to 120,000 metric tons. (Maybank IB)
3.4 Corporate Strategy
Scientex Berhad is on its way to be a good stable giant conglomerate with stable and growing revenues and profits.
Over the years,it has used retained earnings and appropriate borrowings,to diversify into property development.It has made a name for itself as a developer of quality affordable homes in Johor specializing in building affordable homes in the smaller towns in Johor.
By now,property developments is about half of its revenue and profits and manufacturing the other half.Of the manufacturing,about half is export sales and half local sales. Without doubt,their success is a result of clear visions and strategies set by an excellent management team.
While others jump into the lucrative development of condominiums,Scientex are happy to build affordable homes but with a good margin for themselves.At a time when all property stocks,especially the mid cap ones,are shunned by investors ,with PEs in single digits and at a discount to NAV,Scientex still command a PE of 14 based on 12 months trailing figures even though half of its earnings are from property development. That itself is surprising.
Turning a negative into a positive.The properly market is soft and is expected to remain soft, but investors have rewarded Scientex for its successful diversification into property development.In 2015,Scientex has also acquired a piece of land in Senai for $200 million which they will develop into affordable homes and townships. (Star Online, 2013)
3.5 Corporate Social Responsibility
Corporate social obligation is an enterprise’s drives to assess and assume liability for the organization’s impacts on natural and community welfare. The expression generally applies to attempts that go past what may be required by controllers or regular protection get-togethers.
The exercises of Scientex Foundation are primarily supported by commitments from its chief Scientex Berhad. It is a tax absolves substance and may look fordonations from the public. Scientex Foundation is focused on particular problem belong to the environment and healthcare as part of its corporate responsibility initiatives. Scientex Berhad, by means of Scientex Foundation, a non-benefit altruistic association entrusted with doing corporate social obligation exercises in the territories of condition and medicinal services with the reason for making awareness, executing social exercises and teaching with the joint effort of University Malaya Medical Centre (“UMMC”) and Malaysian Plastics Manufacturers Association (“MPMA”).
Scientex Berhad collaboration with UNIVERSITY MALAYA MEDICAL CENTRE. In cervical cancer concerning research item, the Foundation has in May 2010 allotted an underlying total of RM150, 000 to a group of specialists from University Malaya Medical Center to do investigate on the reasonability of a self-specimen gadget to be tried as the other option to the more costly however settles Pap spread test asset. Relate Professor Dr. Lim Boon Kiong drove the 5-part group of analysts and the agreeable testing and acknowledgment of this self-sampler gadget as a solid screening device would have extraordinary meaning as far as accessibility of shoddy access to screening and innovation for cervical disease. (Scientex Berhad annual report 2016)
Scientex Berhad collaboration with MALAYSIAN PLASTICS ANUFACTURERS ASSOCIATION (MPMA). To deliver issues relating to the preservation of the contamination, assurance, condition and protection of characteristic resources, Scientex Establishment and Malaysian Plastics Producers Affiliation (MPMA) have do joint exercises with the principle point of convergence and goal of advancing open cognizance. The coordinated effort between MPMA-Scientex Establishment cut with a saw the gatherings cooperating to create a video generation on a dangerous atmospheric devation and its impacts with unique concentrate on the 3Rs (Reduce, Reuse and Recycle) idea able ‘Sparing Planet Earth – The 3
Rs Arrangement’. The 6-minute video was first authoritatively propelled by the Deputy Minister of International Trade Industry, YB Dato’ Jacob Dungau Sagan at MPMA’s 42nd Commemoration Supper on 20 June 2009.The video has been shown on YouTube, as well as through effort programs in non-government associations (NGO), schools and other applicable bodies. (Scientex Berhad annual report 2016)
Talent retention and Human capital development are elevated precedence, to the Scientex Group is regularly seeking ways to draw, reward retain talents whose skills and experience are assets to the Group, irrespective of their age, background or gender.The Group provide a safe, conducive and secure work environment and has put in place an overall administrator health screening procedure to facilitate and generate a healthy way of life and a positive work approach that is in line with Scientex’s tagline “healthy, friendly & happy”. The gathering likewise gives its representatives a fair compensation design with incidental advantages, including the Scientex Berhad Share Grant Plan, started in 2014 as a component of its reward cum ability reservation drive. (Scientex Berhad annual report 2016)