SCC HOLDINGS BERHAD
KLSE (MYR): SCC (0158)
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CS Tan
4.9 / 5.0
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
johnny cash
6,356 posts
Posted by johnny cash > 2014-07-17 13:55 | Report Abuse
INVESTMENT MERIT
· An unheralded gem. SCC Holdings Berhad (SCC), a modest company
which was listed since 2010, primarily operates under its vision of ‘going
green’ with two core divisions: (i) Animal Health Products Division
(AHPD) and (ii) Foodservice Equipment Division (FED). Under its
AHPD, the Group primarily conducts sales, marketing and distribution of
non-antibiotic animal health products for livestock feeds. On the other
hand, the Group acts as a one-stop-solution distributor of food service
equipments in the F&B industry under FED, which includes provision of
installation, service and maintenance and supply of ingredients.
· Food supplies segment as the new catalyst. The Group ventured
into food supplies manufacturing in FY13 under its in-house brand
name Cook Master and recorded turnover of RM1.3m in five months.
The segment has since seen rapid progress as the Group’s R&D team
worked closely with customers to develop various new food recipes and
premix ingredients, which eventually could lead to expansion of the
retailers’ food menu. Currently, the Group is partnering with a reputable
food retailer to ride with the latter’s aggressive marketing development
plans, where management believes could be the earnings driver moving
forward. SCC has also secured the Halal certification for its premix food
ingredients and this will help facilitate the Group’s venture into the Halal
Food market.
· Exploiting opportunities in the new ruling for green feed solution.
The Government has the intention to enforce a new ruling on farmers to
only use green feed solution. This is to prevent livestock from
consuming animal feed that potentially contains overdose of antibiotics
which residual could affect the immune system of human on over
consumption. In tandem with the Group’s vision to bring green and
wellness products to the industry, SCC could greatly benefit from this
new ruling as they currently work closely with leading biotechnology
companies to develop non-antibiotic and natural feed additives, which is
better and healthier for the growth of livestock.
· Healthy balance sheet with unused IPO proceeds. SCC is currently
sitting on a net cash pile of RM15.7m, implying 36.7 sen/share or 23.4%
of the group’s market capitalisation of RM67.1m. Besides, SCC also
has unutilised IPO proceeds of RM2.3m, which the Group has allocated
for capital expenditures and working capital purposes. Backed by the
strong balance sheet, we believe that the group will be able to finance
its new food supplies segment expansion with ease.
· An attractive minimum dividend payout policy of 35%. In line with
its minimum dividend payout policy of 35%, SCC has been rewarding its
shareholders by declaring 1.0-16.5 sen annual DPS since FY10,
translating into 1.0-11.0% dividend yield. In view of the good prospect
and healthy cash-flow, we understand the Group intends to maintain its
minimum dividend payout policy moving forward. Based on a targeted
dividend payout of 35%, we expect the group to distribute 4.9 sen-5.7
sen DPS in FY14-FY15, translating into dividend yields of 3.2%-3.7%.
· Non-rated with a fair value of RM1.68, based on a targeted 12x CY14
PER (in line with the FBM Small Cap forward PER of 12.4x). While the
group’s valuation appears to provide limited upside from here, its strong
balance sheet and attractive dividend payout remain are favoured by
investors. We will relook the stock when the group’s valuation falls to a
more attractive level.