SCC: Let's make it three in a roll!

Listed in August 2010 at an IPO price of RM0.78, SCC - a distributor of animal health products & Foodservice Equipment- rose steadily over the years to touch a high of RM2.70 in July this year. The stock was sold down to a low of RM1.70 in September. Will it recover from it?

Results Update

SCC's latest results is for QE30/6/2015 which was announced on August 25. Its net profit dropped 28% q-o-q or 29% y-o-y to RM1.1 million while revenue was up 2% q-o-q or 28% y-o-y to RM14.2 million. Bottom-line dropped q-o-q due to higher cost of goods sold incurred and delayed of customers’ projects.


Table: SCC's last 8 quarters results


Chart 1: SCC's last 20 quarters results

Valuation

SCC (closed at RM1.97 last Friday) is now trading at a PE of 12.5 times (based on last 4 quarters' EPS of 15.7 sen). At this PER, SCC is deemed overvalued for a small-cap stock.

Technical Outlook

SCC is in a long-term uptrend, supported by its 20-month EMA line (currently at RM1.70). In the past 2 years, SCC made a low in September and continued with its prior uptrend a few weeks later. This coincided with the best-in-the-year quarterly results reporting, which had been in the last calendar quarter. SCC has in fact begun to recover from the 20-month EMA line support at RM1.70. How far will this rebound go?


Chart 2: SCC's monthly chart as at Oct 30, 2015 (Source: ShareInvestor)

Conclusion

Despite poorer financial performance and rich valuation, SCC could be a good stock for a recovery play.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, SCC.