Stock Name: TASEK
Company Name: TASEK CORPORATION BHD
Research House: CIMB
Tasek Corp Bhd
(April 5, RM5.35)
Downgrade to neutral at RM5.20, target price raised to RM5.90: Tasek is Malaysia's fourth-largest cement manufacturer with an annual capacity of 2.3 million tonnes each for cement and clinker. The group is also one of the top five ready-mixed concrete producers in Malaysia.
While our recent plant tour left us feeling optimistic about the company's medium-to-long term prospects, earnings could be weak in the near term given lower sales volumes and higher rebates across the industry.
In light of this, we are cutting our FY10 earnings per share (EPS) by 11%. However, our blended target price is raised from RM5.20 to RM5.90 as we revise our target valuations to 13.5 times price/earnings (P/E) from 12 times previously and one times price/book value (P/BV) from 0.8 time previously given the potential improvement in the mid-to long-term prospects.
While we acknowledge that a stronger pick-up in demand is likely to come through in 2H, the rise in demand is coming through slower than expected. Furthermore, there is limited share price upside as buying interest since its 4Q results announcement has pushed Tasek's share price up 33% year to date, better than the market's 5% gain.
Given the lack of short-term catalysts due to weak demand and high rebates, we downgrade the stock from outperform to neutral. For better exposure to pump-priming, we prefer direct exposure to the contractors.
The growth prospects for the construction sector and the fundamentals for the building materials sector remain positive for 2010 and beyond. We project growth of 4.6% for the construction sector in 2010 and 5.6% in 2011. Demand for building materials should rise in tandem.
Tasek is hoping that demand for cement picks up about 5% this year, led by stronger growth in the second half. This should enable it to scale back its rebates, leading to further upside to earnings and margins.
When it announced its 4Q results in February, Tasek proposed a dividend and capital repayment. Although it will involve an amount of about 29% of its end-FY09 cash pile of RM356 million, Tasek expects its cash position to stay strong given the RM80 million free cash flow generated each year.
We believe that the cash could be used for further downstream expansion into precast concrete or upstream expansion. - CIMB Research, April 5
This article appeared in The Edge Financial Daily, April 6, 2010.
Company Name: TASEK CORPORATION BHD
Research House: CIMB
Tasek Corp Bhd
(April 5, RM5.35)
Downgrade to neutral at RM5.20, target price raised to RM5.90: Tasek is Malaysia's fourth-largest cement manufacturer with an annual capacity of 2.3 million tonnes each for cement and clinker. The group is also one of the top five ready-mixed concrete producers in Malaysia.
While our recent plant tour left us feeling optimistic about the company's medium-to-long term prospects, earnings could be weak in the near term given lower sales volumes and higher rebates across the industry.
In light of this, we are cutting our FY10 earnings per share (EPS) by 11%. However, our blended target price is raised from RM5.20 to RM5.90 as we revise our target valuations to 13.5 times price/earnings (P/E) from 12 times previously and one times price/book value (P/BV) from 0.8 time previously given the potential improvement in the mid-to long-term prospects.
While we acknowledge that a stronger pick-up in demand is likely to come through in 2H, the rise in demand is coming through slower than expected. Furthermore, there is limited share price upside as buying interest since its 4Q results announcement has pushed Tasek's share price up 33% year to date, better than the market's 5% gain.
Given the lack of short-term catalysts due to weak demand and high rebates, we downgrade the stock from outperform to neutral. For better exposure to pump-priming, we prefer direct exposure to the contractors.
The growth prospects for the construction sector and the fundamentals for the building materials sector remain positive for 2010 and beyond. We project growth of 4.6% for the construction sector in 2010 and 5.6% in 2011. Demand for building materials should rise in tandem.
Tasek is hoping that demand for cement picks up about 5% this year, led by stronger growth in the second half. This should enable it to scale back its rebates, leading to further upside to earnings and margins.
When it announced its 4Q results in February, Tasek proposed a dividend and capital repayment. Although it will involve an amount of about 29% of its end-FY09 cash pile of RM356 million, Tasek expects its cash position to stay strong given the RM80 million free cash flow generated each year.
We believe that the cash could be used for further downstream expansion into precast concrete or upstream expansion. - CIMB Research, April 5
This article appeared in The Edge Financial Daily, April 6, 2010.
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