Tuesday, June 12, 2012

SCC- rose above its IPO price

Background

SCC Holdings Bhd ('SCC') is involved in the distribution of animal health products & Foodservice Equipment. It was listed on our exchange in August 2010. Its IPO price was RM0.78.

Recent Financial results

From the table & Chart 1 below, we can see that the financial performance of SCC is deemed quite satisfactory. In the latest quarter (QE31/3/2012), its net profit dropped 31% q-o-q but rose 5% y-o-y to RM1.3 million while its revenue dropped 13% q-o-q or 7% y-o-y to RM8.8 million. While the company has stated that there is no seasonal effect on its performance, we can see that its top-line & bottom-line tend to perk up at the year end, which is not unusual since its products have some connection to the consumer sector (that benefits from year end festivities).


Table: SCC's last 7 quarters results


Chart 1: SCC's last 7 quarters results

Valuation

SCC (closed at RM0.93 today) is now trading at a PE of 7.4 times (based on last 4 quarters' EPS of 12.5 sen). At this PE multiple, SCC is deemed fully valued for a smallcap.

Technical Outlook

SCC broke above its resistance at RM0.65 & RM0.78 over the past 2 months. The breakout above its IPO price is quite significant as this means that investors have come around to view the stock in a positive light. For this to happen in a market that is overflowing with negative sentiment, speaks a lot about the positive outlook for the stock. However, the current strength could be due to nothing more than an attractive dividend payout of 6.5 sen (entitlement date: July 7).


Chart 2: SCC's weekly chart as at June 12, 2012_4.30pm (Source: Quickcharts)

Conclusion

Based on good financial performance and potentially bullish technical outlook, SCC could be a good stock for long-term investment.


1 comment:

Jimmy Yeoh said...

Hi Alex,

Can you comment on EVERGRN(5101)?

Thanks.