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Tuesday, November 14, 2017

SAMCHEM: Earnings Rose

Background

Samchem Holdings Bhd ('Samchem') is a leading industrial chemical distributor in Malaysia. Its operation covers most of the ASEAN countries, including Malaysia, Indonesia, Singapore, Vietnam & Cambodia



Recent Financial Performance

For QE30/9/2017, its net profit rose 22% q-o-q or 11% y-o-y to RM6.3 million while revenue rose 17% q-o-q or 12% y-o-y to RM243 million. The increased revenue was atributed to higher sales, which in turn was due to "the strategic market positioning of the Group in the ASEAN region."


Table: Samchem's last 11 quarterly results


Graph: Samchem's last 11 quarterly results

Financial Position

Samchem's financial position is deemed satisfactory with adequate liquidity (based on cyrrent ratio of 1.6x) while leverage is a bit elevated (based on total liabilities to total equity of 1.9x).

Valuation

Samchem (closed at RM1.04 yesterday) is now trading at a PER of 10x. Its dividend yield is decent at 3%. Based on recent strong growth (of at least 30%), Samchem has a PEG ratio of 0.3x. For a growth stock, this PEG ratio is deemed low and it makes the stock fairly attractive.

Technical Outlook

Samchem broke above its intermediate downtrend line, R1-R1 at RM0.60 in early September. It rallied to a high of around RM1.00 and then formed a rising wedge ('ABCD'). Today it broke to the upside of the wedge at RM1.03. If Samchem can stay above the breakout level, it may test the line connecting its recent peaks, XY at RM1.07. If it can also break above this line, it may go into its next upleg.


Chart: Samchem's daily chart as at Nov 13. 2017_10.00am(Source: Malaysiastock.biz)

Conclusion

Based on good financial performance and position and fairly attractive valuation, Samchem is a good stock for long-term investment.

Note:
I hereby confirm that I do not have any direct interest in the security or securities mentioned in this post.
 However, I could have an indirect interest in the security or securities mentioned as some of my clients may have an interest in the acquisition or disposal of the aforementioned security or securities. As investor, you should fully research any security before making an investment decision.

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