Samchem Holdings Bhd

Chemical specialty player

• Samchem’s chemical distribution segment is well positioned to undertake the higher demand for pharmaceutical products that are used as active ingredients or excipients for the production of medicinal products.

• Key clientele includes well established oil & gas players such as ExxonMobil Chemical, Shell, Petronas and BASF.

• At current price of RM0.73, Samchem is trading at trailing-12-months (TTM) PE of 8.7x, which is below peers average in upper teens, suggesting some upside in our view. Technically, share price has breakout above the RM0.725 resistance, targeting RM0.81-RM0.87 with long term target at RM0.95.

Trading Catalyst

• Samchem Holdings Bhd (Samchem) involved in the distribution of chemicals and blending of customised products that is used in personal care & grooming, household, care & cleaning and in industries such as the automotive, manufacturing, construction, paints and inks, agriculture and oil & gas. Some of Samchem’s key clientele includes well established oil & gas players such as ExxonMobil Chemical, Shell, Petronas and BASF.

• Following the outbreak of Covid-19, Samchem’s chemical distribution segment is well positioned to undertake the higher demand for pharmaceutical products that are used as active ingredients or excipients for the production of medicinal products.

• At current price of RM0.73, Samchem is trading at trailing-12-months (TTM) PE of 8.7x, which is below the peers such as Luxchem (TTM PE at 19.7x) and CCM (TM PE at 18.2x). Like most companies across the board, we see earnings recovery to take place from 3QFY20 amid the gradual resumption of operations from the third phase of the Movement Control Order (MCO). In the meantime, Samchem has been rewarding shareholders with decent dividends since listing on Bursa Malaysia in FY09 with dividend yield of 5.5% recorded in FY19.

Technical Outlook

• Technically, share price is resuming the upward momentum after finding stability around the daily EMA60 level. Price has formed a resistance breakout above RM0.725 accompanied by improved volumes that may see renewed trading interest to power share price higher towards the next resistances at RM0.81-0.87 with long term target set at RM0.95. Support is pegged at RM0.68 and cut loss is located at RM0.675.

Source: Mplus Research - 13 Jul 2020