Top Story : Lafarge M Cement – Better times ahead Market Perform
Visit Note:
- While demand growth in 1HFY12/10 is likely to be flattish on yoy basis, we sense that Lafarge is positive on domestic cement consumption from 2HFY12/10, on the back of the roll out/ resumption of several largescale projects.
- Rise in demand and selling prices is to be partly offset by higher energy prices, as thermal coal prices have risen to US$98.16/metric tonne, from US$68.6 a year ago. Should the government approve TNB’s proposal to increase electricity tariff, Lafarge’s production cost will be higher, hence further lowering margins.
- Lafarge’s initial plan to invest in a new RM100m grinding plant to resolve its production bottleneck is put on hold for the time being. We believe a decision will be made in a few months’ time when it starts to see a surge in demand.
- We believe Lafarge will declare a higher dividend for FY12/10 in view of its strong cash position. Based on our estimates, Lafarge can raise FY12/10 gross DPS from 38 sen to 60 sen, translating to a yield of 9.1%.
- We are raising our FY12/10 earnings forecast by 18.7% to RM361.1m, while indicative fair value remains unchanged at RM6.83 based on 14x FY12/11 EPS of 48.8 sen. Maintain Market Perform.
RHB Equity 360° (Lafarge, Adventa; Technical: Top Glove, Hai-O)-14/06/2010
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