SamChem Berhad - The Chemical Company

THIS ARTICLE HAS BEEN UPDATED ON 15TH SEPTEMBER 2021

Company : SamChem Holdings Berhad

Business:

Distribution of chemical and lubricant for various industry electronic, agriculture, oil & gas, construction, printing, automotive etc. Distribution business model is low margin but stable business (less fluctuation). The sectors covered are very wide which mean the business is not dependent on single sector. Company also expands their business in ASEAN especially in Vietnam and Indonesia.

Some of the well-known chemical companies that represented by SamChem.

Fundamental 

RM1 billion revenue company with bank borrowing of RM255 million against cash at bank of RM143millon as at 30^th June 2021. This business model requires long credit days and high working capital. Hence short-term borrowing is necessary. The cash flow from operation can run into negative as company build up inventory. Nevertheless, the company has established the business for long time and no problem to operate in such a way.

 

 

 

 

5 years revenue

Year	2020	2019	2018	2017	2016
Revenue (‘000)	1,052,510	1,057,342	1,096,222	937,523	697,178
PBT ('000)	60,293	36,120	32,190	36,052	27,999
PAT ('000)	44,436	25,933	23,671	26,235	18,954
DPS	4.2	4.0	3.0	3.0	5.5

 

 

There is a clear growth of profit margin from 1.6% to 5% although still low. Improve of margin is attributed to various cost control measures and efficiency in distribution. Hopefully this trend will continue. Revenue surpassed RM1 billion-mark in 2018 with major contributions from Malaysia, Vietnam and Indonesia.

 

Geographical revenue breakdown. 

Malaysia is still the largest contributor of revenue.

2020	Malaysia	Indonesia	Vietnam
Revenue (million)	458	132	450
Breakdown	44%	13%	43
PBT (million)	33	9.7	18.1
Break down	54%	16%	30%

 

Lates result at glance :

Q2 Result

 Prospect:

The business is very much depending on the GDP growth as their products covers wide industry. Few good things to look forward to improve their profit margin further.

• Company is building a warehouse in Pulau Indah.
• Awarded distributorship for Shell lubricants.
• Building warehouse in Vietnam for blending, storage and distribution.
• Low interest is good for the company.

 

 

 

Risk

• Possible Vietnam operation shut down due to COVID ? I still does not have any responds from them despite writing few emails to inquire.
• Raw material price increase as a lot of chemical are crude oil based.

 

Dividen

Stable dividen paying although not much.

 

Technical Analysis on Chart:

Price speak at RM1.99 before droping to RM0.66 after bonus issue. It is now gainng momentum to RM0.86 which equivalent to RM1.72 pre-bonus issue.

This company is good for long-term but if you are savvy in technical analysis then short-term trade is possible. At time of writing, I own few SamChem shares.