Are Fundamentals In The Driver’s Seat?

Scientex Packaging (Ayer Keroh) Berhad’s (KLSE:SCIPACK) stock is up by 4.2% over the past month. We wonder if and what role the company’s financials play in that price change as a company’s long-term fundamentals usually dictate market outcomes. In this article, we decided to focus on Scientex Packaging (Ayer Keroh) Berhad’s ROE.

Return on equity or ROE is a key measure used to assess how efficiently a company’s management is utilizing the company’s capital. In other words, it is a profitability ratio which measures the rate of return on the capital provided by the company’s shareholders.

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The formula for return on equity is:

Return on Equity = Net Profit (from continuing operations) ÷ Shareholders’ Equity

So, based on the above formula, the ROE for Scientex Packaging (Ayer Keroh) Berhad is:

7.9% = RM33m ÷ RM412m (Based on the trailing twelve months to October 2025).

The ‘return’ is the yearly profit. So, this means that for every MYR1 of its shareholder’s investments, the company generates a profit of MYR0.08.

Check out our latest analysis for Scientex Packaging (Ayer Keroh) Berhad

So far, we’ve learned that ROE is a measure of a company’s profitability. Based on how much of its profits the company chooses to reinvest or “retain”, we are then able to evaluate a company’s future ability to generate profits. Assuming everything else remains unchanged, the higher the ROE and profit retention, the higher the growth rate of a company compared to companies that don’t necessarily bear these characteristics.

On the face of it, Scientex Packaging (Ayer Keroh) Berhad’s ROE is not much to talk about. However, the fact that the company’s ROE is higher than the average industry ROE of 4.3%, is definitely interesting. But then again, seeing that Scientex Packaging (Ayer Keroh) Berhad’s net income shrunk at a rate of 13% in the past five years, makes us think again. Remember, the company’s ROE is a bit low to begin with, just that it is higher than the industry average. Therefore, the decline in earnings could also be the result of this.

Furthermore, even when compared to the industry, which has been shrinking its earnings at a rate of 9.9% over the last few years, we found that Scientex Packaging (Ayer Keroh) Berhad’s performance is pretty disappointing, as it suggests that the company has been shrunk its earnings at a rate faster than the industry.

Earnings growth is a huge factor in stock valuation. What investors need to determine next is if the expected earnings growth, or the lack of it, is already built into the share price. This then helps them determine if the stock is placed for a bright or bleak future. Is Scientex Packaging (Ayer Keroh) Berhad fairly valued compared to other companies? These 3 valuation measures might help you decide.

While the company did payout a portion of its dividend in the past, it currently doesn’t pay a regular dividend. This implies that potentially all of its profits are being reinvested in the business.

On the whole, we do feel that Scientex Packaging (Ayer Keroh) Berhad has some positive attributes. However, while the company does have a decent ROE and a high profit retention, its earnings growth number is quite disappointing. This suggests that there might be some external threat to the business, that’s hampering growth. Until now, we have only just grazed the surface of the company’s past performance by looking at the company’s fundamentals. So it may be worth checking this free detailed graph of Scientex Packaging (Ayer Keroh) Berhad’s past earnings, as well as revenue and cash flows to get a deeper insight into the company’s performance.

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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.