SAMCHEM (5147) SAMCHEM HOLDINGS BHD : Healthcare Related Play with Evergreen Products
SAMCHEM is an established regional chemical distributor. Samchem distributes industrial chemicals and
specialty chemicals across the region, including Malaysia, Vietnam,
Indonesia and Singapore. The group supplies about 500 types of
petrochemicals to over 7,000 clients across various industries, such as rubber, pharmaceutical, plastic, automotive, personal care, agriculture and etc.
Source: SAMCHEM website
1. Have Been Growing in the Past 30 Years (Experienced a few times of Crisis) and May Continue to Grow
Samchem
started operations as a chemical distributor in Malaysia in
1989. Today, the Group has subsidiaries around South East Asia and is
continuing to expand its network in the region.
2. Samchem companies are in the Supply Chain (as chemical raw material distributor) to Essential Goods Manufacturers
While
supply chains were affected during the Movement Control Order (MCO),
Samchem was allowed to operate because chemical products are considered
essential goods.
Samchem supplies to Essential Goods Manufactures (hand sanitisers, disinfectants, personal and household care, gloves, some personal protective equipment,
as well as the printing and packaging associated with all these
products) and were able to meet the demand from these manufacturers in
spite of the lockdowns.
Samchem
may see increase in demand of hand sanitisers, disinfectants, personal
and household care which caused a surge in demand for ethanol-based
products.
3. Anticipate impending improvement in demand for chemicals
Besides
a surge in demand for ethanol-based chemicals during MCO, there is
increase in demand for chemicals used in the packaging, and
petrochemicals, as most industries started their operations since the
RMCO.
4. Highest ROE but Cheapest Chemical Player among Peers - with Potential Upside of more than 100%?
Source: RHB estimates, Bloomberg
If you look at Samchem’s valuation and its peers, it was only traded at 1 year forward PER at 8 times.
By using whichever valuation metric, SAMCHEM appears to be extremely attractive.
In the PART II, some of the details may be discussed especially on how
Samchem benefited from its direct and indirect customers as a Essential
Goods Manufacturers in hand sanitisers, disinfectants, personal and
household care, gloves, some personal protective equipment.
That will give a clearer picture of SAMCHEM as one
of the best healthcare plays with its defensive business model, strong
dividend yields and indirect beneficiary of strong demand in PPE sector.
Disclaimer:
The information is provided for
information only and does not constitute, and should not be construed
as, investment advice or a recommendation to buy, sell, or otherwise
transact in any investment including any products or services or an
invitation, offer or solicitation to engage in any investment activity.
It is
strongly recommended that you seek professional investment advice before
making any investment decision. Any investment decision that you make
should be based on an assessment of your risks in consultation with your
investment adviser.
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