KUALA LUMPUR (Feb 23): Hwang DBS Vickers Research is maintaining its fully valued recommendation on Lafarge Malayan Cement with a target price of RM6 pegged to 15 times 2012F PE (10% discount to its CONSTRUCTION [] sector average).
It said on Thursday that the dividends are supported by stable operating cash flow, substantial net cash position (RM244 million) and minimal capex requirements.
On the fourth quarter results, HDBSVR said the net profit was RM117 million (+46% on-year, +65% on-quarter).
The main factors were due to lower coal prices (Newcastle coal fell 6% on-quarter) and higher plant efficiency through lower maintenance costs, resulting in a 27% EBITDA margin vs 1Q11-3Q11’s 18-21%, and a lower corporate tax rate (18% vs 1Q11-3Q11’s 26%) after reversal of deferred tax.
HDBSVR said topline grew 6% on-year on higher cement prices (+9% in May 2011) and improved demand from higher construction activity, but mitigated by volatile rebates by smaller players.
“FY11 net profit beat our and consensus’ estimate by 13%. A 10 sen interim DPS was declared, taking FY11 dividends to 34sen and implying 91% full year payout.
“FY12 should be challenging for Lafarge, given: (i) enforcement of the Competition Act 2010 that is effective since January 2011; (ii) greater indirect pricing pressure as smaller players offer larger rebates; and (iii) potentially late kick-start of major infrastructure projects (awards for MRT tunneling works are expected in April 12, with civil works likely to start a year later),” said HDBSVR.
It said on Thursday that the dividends are supported by stable operating cash flow, substantial net cash position (RM244 million) and minimal capex requirements.
On the fourth quarter results, HDBSVR said the net profit was RM117 million (+46% on-year, +65% on-quarter).
The main factors were due to lower coal prices (Newcastle coal fell 6% on-quarter) and higher plant efficiency through lower maintenance costs, resulting in a 27% EBITDA margin vs 1Q11-3Q11’s 18-21%, and a lower corporate tax rate (18% vs 1Q11-3Q11’s 26%) after reversal of deferred tax.
HDBSVR said topline grew 6% on-year on higher cement prices (+9% in May 2011) and improved demand from higher construction activity, but mitigated by volatile rebates by smaller players.
“FY11 net profit beat our and consensus’ estimate by 13%. A 10 sen interim DPS was declared, taking FY11 dividends to 34sen and implying 91% full year payout.
“FY12 should be challenging for Lafarge, given: (i) enforcement of the Competition Act 2010 that is effective since January 2011; (ii) greater indirect pricing pressure as smaller players offer larger rebates; and (iii) potentially late kick-start of major infrastructure projects (awards for MRT tunneling works are expected in April 12, with civil works likely to start a year later),” said HDBSVR.
