Stock Name: LMCEMNT
Company Name: LAFARGE MALAYAN CEMENT BHD
Research House: AFFIN
Company Name: LAFARGE MALAYAN CEMENT BHD
Research House: AFFIN
Given the rising coal prices, KL Affin thinks there could likely be another round of price hike over the next three to six months.
Given historical trend, KL Affin expects it would likely be another 10 per cent hike in gross selling price. The most recent hike was in May 2010, where Ordinary Portland Cement average gross selling price (ASP) was raised by 10 per cent to RM305 per tonne.
Based on our simulation, all things being equal, for every RM5 per tonne hike in cement price, it will raise our earnings by 8 per cent.
Going forward, as we expect demand to at least remain stable, if not improve, rebates would also likely to be lower. recommendation.
We believe at current price level, we believe the market has already imputed the positive construction newsflow, while any potential hike in selling prices will likely be offset by the rising coal prices.
La Farge Cement continues to offer a decent yield of around 4-5 per cent , based on 80-90 per cent payout ratio. However, this is insufficient to offset the expensive valuation.
Currently, at 16.5 times current year 2011 price earnings ration, it is trading at a premium to its high of 14 times forward P/E during the last peak of construction sector growth in Q3 2007.
Hence, we maintain our 'Reduce' recommendation with a slightly lower target price of RM6.60, based on an unchanged target PER of 14.5 time. - Reuters
Given historical trend, KL Affin expects it would likely be another 10 per cent hike in gross selling price. The most recent hike was in May 2010, where Ordinary Portland Cement average gross selling price (ASP) was raised by 10 per cent to RM305 per tonne.
Based on our simulation, all things being equal, for every RM5 per tonne hike in cement price, it will raise our earnings by 8 per cent.
Going forward, as we expect demand to at least remain stable, if not improve, rebates would also likely to be lower. recommendation.
We believe at current price level, we believe the market has already imputed the positive construction newsflow, while any potential hike in selling prices will likely be offset by the rising coal prices.
La Farge Cement continues to offer a decent yield of around 4-5 per cent , based on 80-90 per cent payout ratio. However, this is insufficient to offset the expensive valuation.
Currently, at 16.5 times current year 2011 price earnings ration, it is trading at a premium to its high of 14 times forward P/E during the last peak of construction sector growth in Q3 2007.
Hence, we maintain our 'Reduce' recommendation with a slightly lower target price of RM6.60, based on an unchanged target PER of 14.5 time. - Reuters
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