SCC Holdings Berhad

SCC (Fundamental: 1.95/3, Valuation: 2.4/3) may appeal to yield-seeking investors. Dividends increased from 5 sen per share in 2010 to 10 sen per share in 2012-2013, translating into a higher-than-market average net yield of 6.7%. 

Although earnings have been somewhat flattish over the past few years, the company has a solid balance sheet with net cash of RM15.0 million or 35.1 sen per share. Its trading business – SCC is mainly involved in the distribution of non-antibiotic animal health products and food service equipment and supplies such as rapid cooking ovens, pressure flyers and popcorn ingredients – is asset-light. Thus, dividends should be sustainable. 

Sales increased from RM35.6 million in 2011 to RM38.7 million in 2013 but pre-tax profit declined from RM7.2 million to RM6.9 million. Net profit margin was decent, at 13.1-14.6% during the same period. With no borrowings, ROE was high, averaging 15.9% from 2011 to 2013.

For 2014, sales increased 5.9% y-o-y to RM41.0 million while pre-tax profit surged 30.9% to RM9.0 million, mainly due to higher sales of food service equipment and supplies.

SCC started distributing animal health products in 1974. Its main suppliers are US-based Anitox Corporation, a global leader in the control of pathogens and other unwanted microbes, and South Korea’s Hyun Young International Corporation. The company concentrates on clean feed solutions as well as other non-antibiotic animal feed additives.

The food service equipment segment began in 1978, after the company’s founders ventured into the fast food industry. Some of SCC’s poultry farm customers also followed the same path, thereby boosting demand for its food service equipment. The unit accounted for 58.7% of sales in 2013 with the balance coming from animal health products. 

The stock is trading at a trailing 12-month PE ratio of 9.7 times and P/BV of 1.89 times. 

This article first appeared in The Edge Financial Daily, on March 10, 2015.