PP 7767/09/2010(025354)

Malaysia RHB Research

Institute Sdn Bhd
A member of the
RHB Banking Group
Company No: 233327 -M

New Listing
23 July 2010
MARKET DATELINE

SCC Holdings Issue Price : RM0.78

Fair Value : RM0.80

Public Issue Of 11.1m Shares to Malaysian Public, Eligible

Employees and Identified Investors

Table 1: Investment Statistics Bloomberg: SCHB MK

Pre-tax Net EPS Net
FYE Turnover Profit Profit EPS Growth PER P/NTA Gearing ROE GDY
Dec (RMm) (RMm) (RMm) (sen) (%) (x) (x) (%) (%) (%)
2009 34.0 6.6 4.9 11.5 30.6 7.0 1.6 net cash 61.9 n.a.
2010f 40.8 7.8 5.9 13.7 19.7 5.8 1.3 net cash 27.6 8.1
2011f 48.0 9.2 6.9 16.1 17.3 5.0 1.1 net cash 23.8 9.4
2012f 51.4 9.5 7.1 16.6 3.4 4.8 1.0 net cash 21.2 9.7
Valuations based on estimated fair value of RM0.80/share

Issued capital (m shares) 42.8 (RM0.50 par) Market capitalisation (RMm) 34.2

X Background. SCC Holdings (“SCC”) was founded by Mr. Chee Long Sing @ LISTING DETAILS

Cher Hwee Seng, Cher Sew Seng and Goh Ah Heng @ Goh Keng Chin in Listing Sought ACE Market of
Bursa Malaysia
1972. Over the years, the company has built up a reputation as a supplier of
Listing Date 3 Aug 2010
animal products to many local livestock farms and feed millers, particularly Public Issue 11.1m shares
those in the poultry and swine livestock industry. The company also supplies including:
and distributes a wide range of food service equipment. The company’s - 4.3m to eligible

clients include Charoen Pokhand Group, Emivest Bhd, KFC Malaysia, Golden employees;
- 4.8m private
Screen Cinemas and Giant Hypermarkets.
placement; and

X Future plans. Besides having a presence in Brunei, China and Indonesia, - 2m to

Malaysian public.
SCC is keen to expand its business to other regional countries like Vietnam
and Cambodia. SCC is also looking to establish a facility centre for its
MAJOR SHAREHOLDERS
programme development initiatives given that most of its programmes are
Chee Long Sing @ Cher 21.9%
currently conducted at its customers’ farms/feed mills and through Hwee Seng
collaborations with its principal. The company is currently looking into setting Cher Sew Seng 14.0%
up the facility centre within the Kuala Lumpur or Selangor area and has Goh Ah Heng @ Goh Keng 9.5%
allocated approximately RM3m for the programme development initiatives, Chin

which will be funded from the IPO proceeds.

X Forecasts. Going forward, we project SCC to post FY09-12 revenue and net
profit CAGR of 14.7% and 13.2% respectively, driven by: 1) demand growth
for its animal health products as well as for its food service equipment; and
2) business expansion in new regional markets like Vietnam and Cambodia.
As per the prospectus, SCC plans to pay out approximately 35% of its future
net profits to its shareholders and as such we have assumed FY10-12 annual
gross dividend per share of 6.5-7.8 sen, which translates to gross yields and
net payout ratio of 8.1-9.7% (based on listing price) and 34.9-35.5%
respectively.

X Valuations. For comparison purposes, we have selected companies that

have broadly similar business to SCC’s main business. Our target PER implies
a discount of about 50% to the FY11 sector average PER of 10x. We have David Chong, CFA
applied the discount to reflect SCC’s smaller market capitalisation and lack of (603) 92802179
track record among the investment community. Ascribing a target FY11 PER david.chong@rhb.com.my
of 5x, we derive a fair value of RM0.80 for SCC.

Please read important disclosures at the end of this report.

A comprehensive range of market research reports by award-winning economists and analysts are
exclusively available for download from www.rhbinvest.com
 23 July 2010

X Background. SCC Holdings (“SCC”) was founded by Mr. Chee Long Sing @ Cher Hwee Seng, Cher Sew Seng
and Goh Ah Heng @ Goh Keng Chin in 1972. Over the years, the company has built up a reputation as a
supplier of animal products to many local livestock farms and feed millers, particularly those in the poultry
and swine livestock industry. The company also supplies and distributes a wide range of food service
equipment. The company’s clients include Charoen Pokhand Group, Emivest Bhd, KFC Malaysia, Golden
Screen Cinemas and Giant Hypermarkets.

X Key products. The group has two main business divisions, namely :

• Animal Health Products Division (“AHPD”)- which comprises sales of non-antibiotic feed additives to
feed millers and livestocks farmers; and

• Food Service Equipment Division (“FSED”)- which comprises sales of hot food and beverage
equipment, sales of spare parts, sale of food ingredients and supplies such as popcorn seeds, popcorn
mix, smoothie mix and other related maintenance.

Chart 1 : Product Mix for FY09

A HP D, 46.7%

FSED, 53.3%

Source: Prospectus

X Major customers and suppliers. In 2009, SCC has about 130 customers for its AHPD and 538 customers
for its FSED respectively. In terms of geographical mix, the domestic market makes up the bulk of total sales
(at least 98.8% for FY09). Meanwhile, about 89.9% of SCC’s total purchases are sourced from overseas with
the majority of these purchases from USA and South Korea.

X Industry overview. According to the market research report by Protégé Associates, the market size of the
non-antibiotic feed additives market is estimated to be around RM94.1m in 2009. This would mean that SCC’s
AHPD held a market share of approximately 16.9% of the non-antibiotic feed additives market in Malaysia. As
for its FESD division, SCC held a market share of 6.2% in 2009, based on the estimated market size of
RM291.7m for the total food service equipment in Malaysia.

According to the same report, the Malaysia’s animal feed additives market equipment faces a bright outlook,
driven by the growing local livestock production and changing preference of livestocks farmers towards the
usage of non-antibiotic feed additives. As for the FESD, the outlook remains positive on the back of the
growth of restaurants in order to cater for Malaysian consumers as well as product expansion by
hypermarkets and departmental stores to include more prepared food for shoppers’ convenience.

X Key highlights. Key highlights for SCC include:

• One-stop solution provider. SCC is capable of providing end-to-end solutions to its customers, where
both of its divisions, AHPD and FESD, work closely with its current as well as potential customers to
provide comprehensive services. This includes pre-sales consultation, user training as well as after-sales
support; and

SCC 2 HOLDINGS
A comprehensive range of market research reports by award-winning economists and analysts are
exclusively available for download from www.rhbinvest.com
 23 July 2010

• Established business relationship and proven track record. With more than 30 years experience in
the AHPD and FESD, the company has established good business relationships and has a proven track
record with its customers. Majority of its customers have been with the company for more than 10 years.
The company also works very closely with the suppliers, which allows them to mitigate the risk of
shortage/delay in supplies. These long working relationships also enable them to obtain consistent and
competitive pricing for its products.

♦ Risk factors. We see the following key risk factors:

• Foreign exchange. Given the mismatch between foreign currency denominated revenue and purchases,
SCC could be adversely affected by a weakening RM as this would result in more expensive raw material
costs. In order to minimise the impact of forex, the company would reflect the prevailing exchange rate in
their selling prices for back-to-back orders, where possible. In addition, the company’s trade payable
turnover period is relatively short, i.e. 10-22 days; and

• Dependency on local market. Given that approximately 98% of SCC’s revenue is derived locally, the
company is highly dependent on local market. Although export markets remains relatively insignificant, it
has shown some improvement over the years. As such, the company has taken steps to diversify its reach
by trying to expand into new regional markets such as Vietnam and Cambodia.

♦ Future plans. Besides having a presence in Brunei, China and Indonesia, SCC is keen to expand its business
to other regional countries like Vietnam and Cambodia. SCC is also looking to establish a facility centre for its
programme development initiatives given that most of its programmes are currently conducted at its
customers’ farms/feed mills and through collaborations with its principal. The company is currently looking
into setting up the facility centre within the Kuala Lumpur or Selangor area and has allocated approximately
RM3m for the programme development initiatives, which will be funded from the IPO proceeds.

♦ Listing and offer proceeds. The total proceeds from the public issue will amount to RM8.7m and will be
utilised as per Table 2.

Table 2: Utilisation Of Proceeds From The Public Issue

RMm

Capital expenditure 2.0

Programme development expenditure 3.0

Working capital 2.3

Estimated listing expenses 1.4

Total 8.7
Source: IPO Prospectus

♦ Forecasts. For FY07-09, SCC recorded revenue and net profit CAGR of 6.2% and 20.9% respectively due to:
1) the increase in number of AHPD products sold as well as higher sales value from FESD; and 2) the
improvement in margins due to increase in sales of higher margin products and strengthening of RM against
US$.

Going forward, we project SCC to post FY09-12 revenue and net profit CAGR of 14.7% and 13.2%
respectively, driven by: 1) demand growth for its AHPD as well as FESD; and 2) business expansion in new
regional markets like Vietnam and Cambodia.

As per the prospectus, SCC plans to pay out approximately 35% of its future net profits to its shareholders
and as such we have assumed FY10-12 annual gross dividend per share of 6.5-7.8 sen, which translates to
gross yields and net payout ratio of 8.1-9.7% (based on listing price) and 34.9-35.5% respectively.

♦ Valuations. For comparison purposes, we have selected companies that have broadly similar business to
SCC’s main business. Our target PER implies a discount of about 50% to the FY11 sector average PER of 10x.
We have applied the discount to reflect SCC’s smaller market capitalisation and lack of track record among
the investment community. Ascribing a target FY11 PER of 5x, we derive a fair value of RM0.80 for SCC.

SCC 3 HOLDINGS

A comprehensive range of market research reports by award-winning economists and analysts are
exclusively available for download from www.rhbinvest.com
 23 July 2010

Table 3: Comparative valuations

FY09 FY10 PER FY11 PER FY09
Bloomberg Market cap
Company FYE revenue (x) (x) Operating
ticker (RMm)
(RMm) Margin (%)
Apex Healthcare PHRM MK Dec 256.8 282.7 n.a. n.a. 8.2
CCM Duopharma CCMD MK Dec 332.0 123.8 14.9 13.6 30.7
Charoen Pokphand
Foods CPF TB Dec 17,905.9* 16,445.0* 13.5 13.1 7.0
Emivest EMV MK Dec 94.8 635.8 n.a. n.a. 4.5
Hovid HOV MK Jun 125.7 248.6 5.3 4.6 11.4
Kotra Industries KTRI MK Jun 75.5 90.0 n.a. n.a. 7.3
KFC KFC MK Dec 2,212.7 2,297.4 14.3 12.5 8.6
Pharmaniaga PHRM MK Dec 583.0 1,300.8 8.0 6.2 6.0
Sunzen Biotech SUNZ MK Dec 29.9 28.3 n.a. n.a. 7.3
Y.S.P Southeast Asia YSP MK Dec 121.2 130.8 n.a. n.a. 12.6
Simple average 11.2 10.0

SCC Holdings SCHB MK Dec 34.2 34.04 5.8 5.0 19.3

Valuation for SCC based on our fair value estimate of RM0.80

* Based on conversion rate of 10.0373 baht/RM
Source: RHBRI and Bloomberg

Table 4: Earnings Forecasts

FYE Dec (RMm) 2008PF 2009PF 2010f 2011f 2012f
Revenue 34.2 34.0 40.8 48.0 51.4

Growth (%) 20.5 (0.5) 20.0 17.5 7.1

EBITDA 4.5 7.1 8.5 10.0 10.4

EBITDA margin (%) 13.1 20.7 20.8 20.8 20.3

Depreciation (0.4) (0.5) (0.6) (0.7) (0.9)

EBIT 4.0 6.6 7.9 9.2 9.5

EBIT margin (%) 11.8 19.3 19.3 19.2 18.6

Net interest expense (0.1) 0.1 (0.1) (0.1) (0.1)

PBT 4.0 6.6 7.8 9.2 9.5

Tax (1.1) (1.7) (2.0) (2.3) (2.4)

Minority Interests 0.0 0.0 0.0 0.0 0.0

Net profit 2.8 4.9 5.9 6.9 7.1

Growth (%) 2.3 72.6 19.7 17.3 3.4

Source: Company data, RHBRI’s forecasts

SCC 4 HOLDINGS

A comprehensive range of market research reports by award-winning economists and analysts are
exclusively available for download from www.rhbinvest.com
 23 July 2010

IMPORTANT DISCLOSURES

This report has been prepared by RHB Research Institute Sdn Bhd (RHBRI) and is for private circulation only to clients of RHBRI and RHB Investment
Bank Berhad (previously known as RHB Sakura Merchant Bankers Berhad). It is for distribution only under such circumstances as may be permitted by
applicable law. The opinions and information contained herein are based on generally available data believed to be reliable and are subject to change
without notice, and may differ or be contrary to opinions expressed by other business units within the RHB Group as a result of using different
assumptions and criteria. This report is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered herein. RHBRI does
not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim
whatsoever against RHBRI. RHBRI and/or its associated persons may from time to time have an interest in the securities mentioned by this report.

This report does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and
objectives of persons who receive it. The securities discussed in this report may not be suitable for all investors. RHBRI recommends that investors
independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of
a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Neither RHBRI, RHB Group nor any of its
affiliates, employees or agents accepts any liability for any loss or damage arising out of the use of all or any part of this report.

RHBRI and the Connected Persons (the “RHB Group”) are engaged in securities trading, securities brokerage, banking and financing activities as well as
providing investment banking and financial advisory services. In the ordinary course of its trading, brokerage, banking and financing activities, any
member of the RHB Group may at any time hold positions, and may trade or otherwise effect transactions, for its own account or the accounts of
customers, in debt or equity securities or loans of any company that may be involved in this transaction.

“Connected Persons” means any holding company of RHBRI, the subsidiaries and subsidiary undertaking of such a holding company and the respective
directors, officers, employees and agents of each of them. Investors should assume that the “Connected Persons” are seeking or will seek investment
banking or other services from the companies in which the securities have been discussed/covered by RHBRI in this report or in RHBRI’s previous
reports.

This report has been prepared by the research personnel of RHBRI. Facts and views presented in this report have not been reviewed by, and may not
reflect information known to, professionals in other business areas of the “Connected Persons,” including investment banking personnel.

The research analysts, economists or research associates principally responsible for the preparation of this research report have received compensation
based upon various factors, including quality of research, investor client feedback, stock picking, competitive factors and firm revenues.

The recommendation framework for stocks and sectors are as follows : -

Stock Ratings

Outperform = The stock return is expected to exceed the FBM KLCI benchmark by greater than five percentage points over the next 6-12 months.

Trading Buy = Short-term positive development on the stock that could lead to a re-rating in the share price and translate into an absolute return of 15%
or more over a period of three months, but fundamentals are not strong enough to warrant an Outperform call. It is generally for investors who are willing
to take on higher risks.

Market Perform = The stock return is expected to be in line with the FBM KLCI benchmark (+/- five percentage points) over the next 6-12 months.

Underperform = The stock return is expected to underperform the FBM KLCI benchmark by more than five percentage points over the next 6-12 months.

Industry/Sector Ratings
Overweight = Industry expected to outperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Neutral = Industry expected to perform in line with the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

Underweight = Industry expected to underperform the FBM KLCI benchmark, weighted by market capitalisation, over the next 6-12 months.

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation. Additional information on
recommended securities, subject to the duties of confidentiality, will be made available upon request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and RHBRI accepts no liability whatsoever
for the actions of third parties in this respect.

SCC 5 HOLDINGS

A comprehensive range of market research reports by award-winning economists and analysts are
exclusively available for download from www.rhbinvest.com
 23 July 2010

RHB DEALING AND RESEARCH OFFICES

MALAYSIA
RHB Investment Bank Bhd
Level 10, Tower One, RHB Centre,
Jalan Tun Razak
50400 Kuala Lumpur
P.O. Box 12699
50786 Kuala Lumpur, Malaysia
Tel (General) : (603) 9285 2233

Dealing Office
Tel (Dealing) : (603) 9285 2288
Fax (Dealing) : (603) 9284 7467

RHB Research Institute Sdn Bhd

Level 10, Tower One, RHB Centre,
Jalan Tun Razak
50400 Kuala Lumpur
P.O. Box 12699
50786 Kuala Lumpur, Malaysia
Tel (Research) : (603) 9280 2160
Fax (Research) : (603) 9284 8693

◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆◆

Lim Chee Sing

Director

RHBRI is a participant of the CMDF-Bursa Research Scheme and will receive compensation for the participation.
Additional information on recommended securities, subject to the duties of confidentiality, will be made available upon
request.

This report may not be reproduced or redistributed, in whole or in part, without the written permission of RHBRI and
RHBRI accepts no liability whatsoever for the actions of third parties in this respect.