Stock Name: LMCEMNT
Company Name: LAFARGE MALAYAN CEMENT BHD
Lafarge Malayan Cement Bhd
(Sept 12, RM6.91)
Initiate coverage at RM6.91 with neutral rating and target price of RM6.80: LMC is the country's largest cement producer with 46% market share in terms of capacity. LMC's annual rated capacity clinker production currently stands at 8.2 million tonnes against the total industry's clinker of 17.8 million tonnes.
LMC is also the largest listed cement company on Bursa Malaysia with RM5.6 billion in market capitalisation, ahead of YTL Cement Bhd (RM2.3 billion) and Tasek Corp Bhd (RM993 million).
As the largest cement player in Malaysia with more than 40% market share, we believe LMC's cement demand augurs well next year driven by mega projects under the Economic Transformation Programme ETP, namely MyRapid Transit and KL Financial District in Greater Kuala Lumpur and Iskandar Malaysia, Johor, infrastructure projects and other big projects. Apart from that, the ongoing projects under the 10th Malaysia Plan are expected to continue to drive the overall cement demand.
As a multinational company, LMC has a wide distribution network around the world and it is well connected with its parent company, Lafarge SA of France. We see this as an advantage against its peers as the group can take advantage of any pickup in construction activities in other countries.
Thanks to its current strong operating cash flow, LMC's financials are very clean with a net cash balance of RM127 million in FY10. We believe LMC will continue to be in a net cash position since the group keeps maintaining its working capital requirement through improvement in production efficiency and minimal capital expenditure.
The group has been able to dish out dividends to shareholders of 70% to 99% of net profit in FY08 to FY10 or at 34 sen to 38 sen per share per year, resulting in a gross dividend yield of 5.6% to 5.07%. We expect LMC to continue to pay at least 80% of its net profit as dividend throughout FY11E to FY13F or an average of 30 sen to 43 sen per share per year, resulting in a gross dividend yield of 4% to 6%.
We are initiating coverage on LMC with a target price of RM6.80 pegged to its five-year historical average price-earnings multiple of 16 times to FY12F earnings per share of 42.4 sen. ' MIDF Research , Sept 12
This article appeared in The Edge Financial Daily, September 13, 2011.
Company Name: LAFARGE MALAYAN CEMENT BHD
| Research House: MIDF | Price Call: HOLD | Target Price: 6.80 |
Lafarge Malayan Cement Bhd
(Sept 12, RM6.91)
Initiate coverage at RM6.91 with neutral rating and target price of RM6.80: LMC is the country's largest cement producer with 46% market share in terms of capacity. LMC's annual rated capacity clinker production currently stands at 8.2 million tonnes against the total industry's clinker of 17.8 million tonnes.
LMC is also the largest listed cement company on Bursa Malaysia with RM5.6 billion in market capitalisation, ahead of YTL Cement Bhd (RM2.3 billion) and Tasek Corp Bhd (RM993 million).
As the largest cement player in Malaysia with more than 40% market share, we believe LMC's cement demand augurs well next year driven by mega projects under the Economic Transformation Programme ETP, namely MyRapid Transit and KL Financial District in Greater Kuala Lumpur and Iskandar Malaysia, Johor, infrastructure projects and other big projects. Apart from that, the ongoing projects under the 10th Malaysia Plan are expected to continue to drive the overall cement demand.
As a multinational company, LMC has a wide distribution network around the world and it is well connected with its parent company, Lafarge SA of France. We see this as an advantage against its peers as the group can take advantage of any pickup in construction activities in other countries.
Thanks to its current strong operating cash flow, LMC's financials are very clean with a net cash balance of RM127 million in FY10. We believe LMC will continue to be in a net cash position since the group keeps maintaining its working capital requirement through improvement in production efficiency and minimal capital expenditure.
The group has been able to dish out dividends to shareholders of 70% to 99% of net profit in FY08 to FY10 or at 34 sen to 38 sen per share per year, resulting in a gross dividend yield of 5.6% to 5.07%. We expect LMC to continue to pay at least 80% of its net profit as dividend throughout FY11E to FY13F or an average of 30 sen to 43 sen per share per year, resulting in a gross dividend yield of 4% to 6%.
We are initiating coverage on LMC with a target price of RM6.80 pegged to its five-year historical average price-earnings multiple of 16 times to FY12F earnings per share of 42.4 sen. ' MIDF Research , Sept 12
This article appeared in The Edge Financial Daily, September 13, 2011.
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