INVESTMENT HIGHLIGHTS

• FY16 earnings at record high

• Vietnam boosts while Indonesia turns profitable

• Record DPS of 6.5 sen in FY16 and 1-for-1 bonus issue

• Not rated with FV of RM1.55 based on FY17F PER of 12x

FY16 earnings is broadly within expectation. Samchem’s FY16 net profit of RM14.94m makes up 94% of our full year estimates. The Company declared a final interim dividend of 2 sen per share that brings its total dividends for FY16 to 6.5 sen.

Vietnam boosts while Indonesia turns profitable. The countries Samchem operates in registered yoy growth with Vietnam and Indonesia recording the highest growth. Profit before tax (PBT) for Vietnam more than tripled to RM10.49m while Indonesia swung from a pre-tax loss of RM2.62m to pre-tax gain of RM3.88m. Malaysia PBT grew 37% to RM14.72m. This shows that Samchem’s regional expansion and market acquisition is bearing fruits. We expect further growth in these markets in FY17F.

Record DPS of 6.5 sen in FY16 and 1-for-1 bonus issue. The total dividend of 6.5 sen announced for FY16 is the highest amount just yet. On top of that, the company has also announced a 1-for-1 bonus issue, which is expected to improve Samchem’s liquidity as its share base will be enlarged from 136 million to 272 million upon completion of the exercise. We are positive on this development as this is the first major corporate exercise to address its liquidity as its share base has remained intact since its listing in 2009.

We maintain the fair value of RM1.55 on Samchem, which is based on 12x PER of FY17F EPS. Post bonus issue, our fair value will be adjusted to RM0.78. The 12x PER is based on the simple average of chemical distributors listed on Bursa. That said, the dividend and bonus issue could boost sentiments and excite investors.

Source: MIDF Research - 24 Feb 2017